More pain could be ahead for Toronto's micro condo market in 2026

  1/12/2026 |   SHARE
Posted in Condos For Sale by Vanguard Realty | Back to Main Blog Page

Once the darling of real estate investors in Toronto, micro condo units in the city have seen their popularity plunge over the past two years – and that slump is showing no sign of ending in 2026 as the condo market’s high-profile challenges continue.

Record immigration levels, low mortgage rates and surging rental demand helped make those condos a surefire hit for investor buyers since the mid-2000s, leading many builders to prioritize the number of units they could fit into a building at the expense of size.

But appetite for those mini units has nosedived among renters and investors alike, and alarm swept the housing and mortgage industries as nightmare stories of appraisal issues, price cuts and owners suffering big monthly losses on their property became increasingly common.

That crisis has weighed on the performance of the city’s wider condo market. The Building Industry and Land Development Association (BILD) said just 165 new condos were sold across the entire Greater Toronto Area (GTA) in November, lower than the 10-year average by an eyewatering 92% and a 40% plunge compared with the same time last year.

Prices have also continued to slide. In Toronto’s downtown core, average condo prices were down 1.7% in November, according to the Toronto Regional Real Estate Board (TRREB), extending a months-long drop. Across the GTA, prices slipped by 8.7% year over year.

And while some say lower prices could unlock affordability and bring new buyers into the condo sector, few are expecting a reversal in fortunes anytime soon for the thousands of tiny units currently flooding the market.

That means the overall outlook for the condo market across the GTA looks gloomy, especially with little sign that the demand-supply gap is narrowing.

“We don’t see a quick turnaround on that front,” Doug Porter (pictured below), chief economist of Bank of Montreal (BMO), told Canadian Mortgage Professional. “That’s probably the last area that will turn just because of the amount of supply that’s now hitting the market.

“Population growth… is now starting to slow very rapidly, so rents are coming down – at least, market rents. So I suspect that the condo market will remain a challenge through [2026].”

Are preferences in the condo market shifting?

Builders and developers speaking with CMP towards the end of last year see more opportunity in liveable condos geared towards the end user rather than investors, potentially signalling a shift in how developers approach construction in the city in the years ahead.

In November, a Leger survey commissioned by Rates.ca showed that 35% of Canadians say condos are no longer a good investment, although Canadians under 35 are likelier to consider purchasing one than over-35s.

That could mean a market more closely watched by buyers who intend to live in the condo they purchase than by investors eyeing a property to rent out.

But buyers are still facing plenty of challenges with price drops to date failing to move the needle significantly for many who’ve found themselves frozen out of the market.

Why lower prices aren’t causing a flood of new buyers

In September, Royal Bank of Canada (RBC) assistant chief economist Robert Hogue said buyers and builders are currently locked in a standoff, with high construction costs and other charges meaning many developers aren’t willing to bring their prices as low as buyers expect for preconstruction units.

“High development and construction costs have pushed new project pricing beyond what many buyers can afford, particularly when existing alternatives offer immediate occupancy and established neighbourhood amenities,” he pointed out.

And a GST rebate for first-time homebuyers won’t change that picture much, he said. “The fundamental challenge lies in addressing the substantial disconnect between what buyers are willing to pay and what developers can viably offer,” he said, “given high development and construction costs.”

All that points to a Toronto condo market that’s likely to stay frozen for the foreseeable future, even if the outlook for existing units is slightly brighter than for the beleaguered preconstruction space.

“Broad economic recovery and returning market confidence will eventually revive condo demand,” Hogue wrote, “but the path back to higher preconstruction sales is likely longer and more complex.”

Source: Canadian Mortgage Professional

Condo Buyers, Condo Living, Micro Condo Market, Toronto Condo Market