Toronto’s condominium market is facing one of its most challenging periods in years, according to a new analysis from BMO Capital Markets.
Economists at the bank say the Greater Toronto Area condo sector is effectively in a housing recession, with falling prices, weak sales, and a large pipeline of supply that buyers and investors are increasingly reluctant to absorb.
The warning highlights growing structural challenges in Canada’s largest housing market as high borrowing costs and shifting demographics reshape demand.
Toronto’s Real Estate Weakness Is Being Led by Condos
Recent data from the Toronto Regional Real Estate Board shows the condo sector is currently absorbing the largest share of the downturn.
In February 2026:
- Home sales across the Greater Toronto Area fell 6.4% year-over-year
- Benchmark home prices declined 7.9% year-over-year
- Condo prices dropped 9.5% year-over-year
Compared with the peak of the pandemic housing boom in early 2022, condo prices in the region are now approximately 25% lower.
BMO economist Robert Kavcic summarized the situation bluntly, stating:
“The condo market is well in recession.”
For many market observers, the decline reflects the unwind of the investor-driven surge that helped fuel Toronto’s condo boom during the ultra-low interest rate environment of 2020–2022.
Why Pent-Up Demand May Not Save the Market
Some analysts had hoped that pent-up demand from sidelined buyers would help spark a recovery once prices cooled.
However, BMO argues the recovery may not arrive as quickly as many expect.
Despite the Greater Toronto Area’s population approaching 7 million residents, sales activity has remained historically weak for nearly three years. At the same time, a large number of condo units that were launched during the boom years are still being completed.
According to Kavcic, this means supply coming online could match or exceed demand, limiting the chances of a sharp rebound.
Another structural factor is demographics. BMO has previously argued that millennials have already passed their peak home-buying demographic wave, suggesting that demand growth may naturally slow in the years ahead.
Investors Are Pulling Back From Toronto Condos
Investor demand has historically played a major role in Toronto’s condo market.
But rising interest rates and weakening rents have dramatically changed the economics.
Many investors are now facing negative cash flow, where rental income fails to cover mortgage payments, maintenance fees, and taxes.
As Kavcic explains:
“Investors aren’t going to touch this market, taking on negative cash flow at a time when rents and prices are both falling.”
With investors stepping back, the market is increasingly dependent on end-user buyers, who tend to be more selective about the types of units they purchase.
A Growing Pipeline of Supply Buyers Don’t Want
One of the biggest concerns highlighted in BMO’s research is the large pipeline of condo inventory currently under construction.
While developers have begun cancelling or delaying new projects due to weak presales, thousands of units that were already started during the boom years are still scheduled to be completed.
According to Kavcic:
“Residential condo construction is going to fall off further given presale activity has dried up. The pipeline is full of inventory that end-users don’t really want. This will be the market rebalancing itself.”
Many of these units were designed primarily for investors, often featuring small floorplans and studio layouts, which may be less appealing to end-users such as families or long-term homeowners.
What This Signals for the Toronto Housing Market
Toronto’s condo downturn could have broader implications for the region’s housing market.
Condos are typically the entry point for first-time buyers, and weakness in that segment can ripple across other property types.
If the market remains oversupplied while investor demand stays weak, analysts say prices may continue to face downward pressure until the excess inventory is absorbed.
However, over the longer term, Toronto’s strong population growth and housing shortages could eventually help stabilize the market once the current supply pipeline clears.
For now, economists say the condo sector remains one of the most closely watched indicators of where Canada’s housing market could be heading next.
References
Better Dwelling. (2026). Toronto condos in recession as supply outpaces demand. Toronto Condos In Recession, Filled With Supply No One Wants: BMO – Better Dwelling
BMO Capital Markets. (2026). Canadian housing market research note. https://www.bmo.com
Toronto Regional Real Estate Board (TRREB). (2026). Monthly Market Watch Report. https://trreb.ca
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