February 5th, 2025 | Buyers

Why Toronto’s Condo Market is Struggling: A Deep Dive into Supply & Demand

The Toronto condo market has long been a gateway for first-time buyers and investors looking for a foothold in the city’s real estate scene. But if you’ve been paying attention, something has changed. Condo prices have been under pressure, inventory levels are rising, and buyers who were once eager to break into the market are hesitating. What’s behind this slowdown? And more importantly, what does it mean for buyers and sellers moving forward?

A Market Flooded with Inventory

One of the biggest challenges facing Toronto’s condo market is oversupply. New listings have been steadily increasing, while sales aren’t keeping pace. December 2024 saw one of the highest levels of inventory in over a decade, with Months of Inventory (MOI) climbing above 3.4—an indicator that buyers now have significantly more options and bargaining power. Compared to detached homes, which have maintained relative price stability, condos are struggling to find enough demand to absorb the available supply.

What’s driving this surge in listings? Several factors are at play. Many investors who purchased during the last market boom are now looking to offload units as interest rates remain high, and carrying costs continue to eat into their profits. Additionally, new condo completions are adding even more supply to an already saturated market, making it tougher for sellers to command top dollar.

Affordability & Interest Rates: The Buyer Hesitation

It’s easy to assume that falling condo prices would entice more buyers to jump in, but that hasn’t been the case. Even though borrowing costs have come down slightly with recent Bank of Canada rate cuts, mortgage rates are still significantly higher than they were just a couple of years ago. This means that for many first-time buyers, monthly payments remain unaffordable—especially in a high-cost city like Toronto.

Moreover, economic uncertainty is playing a role. Potential buyers who might have entered the market in previous years are holding back, worried about job security and further interest rate fluctuations. Instead of purchasing, many are choosing to stay in the rental market, where despite rising rents, the upfront costs are significantly lower compared to buying a home.

Investor Retreat & the Short-Term Rental Factor

Investors have traditionally been a driving force in Toronto’s condo market, but their presence is now waning. High carrying costs, stricter mortgage rules, and reduced rental demand (due to the return of short-term rental restrictions) are all contributing to a decline in investor activity.

Many condo investors relied on Airbnb and short-term rentals to generate strong cash flow, but regulatory changes have made it harder to operate these units profitably. This shift has led to more investors listing their properties for sale, further adding to the already high supply levels.

What Does This Mean for Buyers & Sellers?

For buyers, this could be a golden opportunity. More inventory means more negotiating power, and sellers are increasingly willing to accept offers below asking price. If you’ve been waiting for a chance to buy, the current market could work in your favor—but only if the numbers align with your personal affordability.

For sellers, the strategy is clear: pricing aggressively is key. Gone are the days when any condo listing would attract multiple offers. To stand out in today’s market, sellers need to work with agents who understand the latest market dynamics, price properties competitively, and ensure top-tier marketing to attract serious buyers.

Looking Ahead: Where is Toronto’s Condo Market Headed?

As we move deeper into 2025, the key question is whether the condo market will stabilize or continue to soften. Much will depend on broader economic trends, interest rate decisions, and how quickly the current surplus of inventory is absorbed. If borrowing costs decline further and economic confidence improves, demand could rebound. However, if rates remain high and affordability remains a challenge, we could see continued downward pressure on condo prices.

One thing is certain: the Toronto condo market is shifting, and both buyers and sellers need to adapt to this new reality. If you’re thinking about making a move, now is the time to have a strategy in place that’s backed by real data—not just speculation.

Need help navigating the market? Let’s talk.