Toronto Pre-Construction Condo Buyers Face Mounting Losses as Market Cools

A growing number of pre-construction condo buyers in Toronto are facing significant financial losses as the city’s housing market cools, leaving them on the hook for potentially hundreds of thousands of dollars. The situation is particularly acute for those who purchased units several years ago, anticipating continued price appreciation.

The Plunge in Value

The average condominium selling price in the Greater Toronto Area (GTA) was down more than five per cent in late 2025 compared to the previous year. Since peaking in early 2022, Toronto condo prices have plummeted by approximately 25 per cent.

The Problem with Pre-Construction Purchases

Buyers who committed to purchasing condos before they were built are now finding themselves in a precarious position. Vitor Almeida, a carpenter and real estate agent in Vaughan, Ontario, agreed to buy a pre-construction condo for $675,000 more than five years ago, putting down a 20 per cent deposit. However, a recent appraisal valued the unit at only $590,000.

This discrepancy creates a significant problem, as mortgage lenders are unwilling to finance the full purchase price when the appraised value is lower. Almeida now faces the prospect of being unable to secure a mortgage and potentially losing his deposit, as well as being pursued for the difference by the developer.

Limited Options for Buyers

Experts say options are limited for buyers in this situation. Mortgage broker Ron Butler believes buyers will likely be unable to avoid the financial consequences of their contracts. “There’s no question that the developer will chase you through the courts and they will win because you signed a valid contract,” he stated.

Butler anticipates 2026 will be the “biggest, problematic year” for Toronto’s pre-construction market, with an estimated 28,000 units expected to be completed and a widening gap between original purchase prices and current market values.

Assignment Sales: A Tricky Route

Some buyers are attempting to mitigate their losses through assignment sales – finding another buyer to take over their purchase. However, this process is not straightforward. Builders must approve the assignment, and can charge fees ranging from a few hundred to tens of thousands of dollars. Real estate lawyer Gathya Manoharan has only seen one client successfully assign a pre-construction condo purchase out of many she has represented.

Market Dynamics and Regulatory Considerations

The current situation is characterized by high condo supply and low demand. Diana Mok, an associate professor specializing in real estate finance at the University of Guelph, suggests that no single policy or regulation can solve the problem, drawing parallels to the risks associated with speculative investments in the stock market.

Mok advises potential buyers to avoid “herd mentality” and carefully consider the risks of committing to a fixed price years in advance.

Navigating the Toronto Real Estate Market

For first-time homebuyers in Toronto, understanding the market is crucial. Key considerations include assessing financial readiness, securing mortgage pre-approval, understanding down payment requirements, and exploring available incentives.

Down Payment Requirements in Canada

• Up to $500,000: 5%
• $500,001 – $1,500,000: 5% on the first $500,000, 10% on the remainder
• Over $1,500,000: 20%

First-Time Buyer Incentives in Ontario

• First Home Savings Account (FHSA): Contribute up to $8,000/year (max $40,000 lifetime). Contributions are tax-deductible and withdrawals for home purchase are tax-free.