Modern living: The GTA’s condo reckoning 

For more than a decade, the GTA condo market ran on a simple premise: Sell it before it’s built and buyers will come. Then build and repeat. 

That pre-construction model reshaped the skyline, turned suburban intersections into clusters of glass towers and supplied much of the region’s new housing.  

It also depended on a particular kind of buyer: investors, first-time purchasers stretching into ownership, and newcomers convinced that, whatever the price, a GTA condo would be worth more by closing day. 

That confidence has cracked. Higher interest rates, tougher financing, weaker investor math and a widening gap between new-condo prices and resale values have left thousands of pre-construction and newly built units unpurchased. Completed and unsold new-condo inventory has climbed to record levels. More units are still under construction and heading toward a market that has largely stopped absorbing them. 

“The new construction market is on life support, and the only thing that will revive it is the math making sense again,” says Robert Van Rhijn, broker of record at Toronto-based Strata Realty. “End users are comparing it to resale, even in recently completed buildings. The average downtown resale condo is selling at just under $900 per square foot right now, while new condos are asking about $1,200. When the finished, move-in-ready resale unit in the building across the street is roughly $300 a foot cheaper, the decision makes itself.” 

While the widespread conversion of condo projects to purpose-built rental buildings has received plenty of attention, two other responses to the current situation — offering incentives to move remaining units, and large buyers purchasing blocks of unsold condos and turning them into rentals — are currently gaining traction.  

The most visible response is an old-fashioned one: make the deal sweeter. For buyers, that doesn’t always mean a simple discount on the sticker price. Developers are offering everything from reduced deposits, mortgage-rate buydowns and cash-back programs to free or discounted parking, capped development charges, assignment-fee relief and upgraded finishes. Some incentives are aimed at end-users who have been priced out for years but now find themselves with rare negotiating power. Others are aimed at investors who might return if the numbers can be made to work. 

At Claystone Condos in Oakville, Graywood Developments is offering what it calls a zero-closing-costs incentive program. Heather Lloyd, Graywood’s senior vice-president of sales and marketing, explains that the incentive was designed partly to put the project “more on par with resale,” where buyers aren’t faced with the same list of new-home closing costs. “It essentially covers a lot of the additional costs that are outlined in the agreement of purchase and sale: energizing fees, turn-on enrolment fees, development charges, that sort of thing. We tried to cover as much as we possibly could so that the mystery of what is involved in closing costs is taken away.” 

Most buyers still active in the market, she says, aren’t speculators chasing a paper gain. At Claystone, prospects tend to be downsizers from Oakville and surrounding communities who like the area and want to stay but haven’t bought a new home in decades. 

For those buyers, the incentive is as much about certainty as savings. “A downsizer may be comfortable comparing neighbourhoods and layouts but less familiar with pre-construction paperwork, development charges and occupancy fees. Removing some of that uncertainty can help them get comfortable with the purchase,” Lloyd says. 

Incentives have become more substantial as the market has softened, she adds. “When the market was hot, we weren’t offering any incentives whatsoever.” 

The units proving hardest to move, Van Rhijn says, are small, investor-oriented suites: studios, one-bedrooms and especially micro-units under 500 square feet. “These were designed for investors’ spreadsheet, not for people. It’s shrinkflation, just applied to a condo instead of a bag of chips.” 

And that, among other factors, has opened the door to bulk buying. 

One of the most striking examples involves Jesta Group. The Montreal-based real-estate company plans to spend up to $500 million acquiring more than 1,000 unsold condo units in downtown Toronto and converting them to rentals. Its first deal was a roughly $30-million purchase of nearly all remaining unsold units in a recently completed downtown building near Toronto Metropolitan University. 

Likewise, a $1.3-billion initiative spearheaded by the Building Ontario Fund in partnership with High Art Capital is designed to acquire blocks of newly completed condo units across the GTA and convert them to rentals. The plan includes an affordability component aimed at workers who earn too much for traditional subsidized housing but too little to comfortably afford market rents. 

“There is a rare opportunity right now to convert newly completed but unsold housing into long-term rental supply at scale,” says High Art Capital managing partner Ryan Roebuck. “This initiative is designed to create real housing availability in the near term, preserve a meaningful affordable component and help stabilize a critical segment of the GTA housing market.” 

The strategy is straightforward. Rather than sell one unit at a time into a weak owner-occupier market, a developer can sell a block of units to a well-capitalized buyer. The buyer can then lease them out, generate income and wait for the market to recover before selling.  

“The bulk buyers are the part worth watching,” Van Rhijn says. “Jesta alone plans to take on the equivalent of nearly half of the 2,300-odd active resale listings in the entire downtown market.” 

For developers, that kind of transaction can be a lifeline. It clears inventory quickly, reduces exposure to a soft market and releases capital that can be used to pay down debt or move on to other projects. For deep-pocketed buyers, it’s a chance to acquire newly built housing in prime locations at prices that may look attractive over a longer horizon. 

For renters, the effect is more complicated. On the one hand, units that might otherwise sit empty can enter the rental market. That creates immediate housing supply in a region where vacancy remains tight and rents remain high by national standards. On the other hand, it accelerates a broader shift in which homes originally designed for individual ownership end up controlled by larger landlords. 

That shift is not entirely new. Investors have long owned individual condo units and rented them out, creating a shadow rental market across Toronto. What’s different now is scale. Instead of thousands of small landlords each owning one or two units, the downturn is creating opportunities for firms to acquire dozens, or hundreds, at once. That could professionalize parts of the rental market, but it also concentrates ownership and raises questions about the long-term availability of entry-level ownership housing. 

“While it looks like a condo glut today, we’re walking straight into a shortage, and that’s exactly what the bulk buyers are positioning for,” Van Rhijn says. “If there was ever a moment for government policy to weigh in, this is it, and to their credit, they’ve started. HST is off new homes under a million dollars, and Ottawa and the province are funding cities to cut development charges. Whether it’s enough is the open question.”