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Is Toronto’s condo market downturn a repeat of the 1990s?

December 22, 2025

Published by: CMHC

September 24, 2025

Key Takeaways

Toronto’s condo market downturn has some worried it will echo what was observed in the past. Several factors point to a softer correction and a less severe outlook than the 1990s crash.

Weaker demand and a slowing economy are making new condominium apartment inventory harder to manage. However, today’s market is shaped by a structural shortage of housing, suggesting inventories will clear as the market recovers. In contrast, the condominium market of the early 1990s faced challenges due to a period of overbuilding.

Banks now require more than 70% of units to be sold before construction can begin. In contrast, Toronto’s condominium market in the late 1980s was driven by speculative builders. They relied on rising prices and more relaxed pre-construction sale requirements (roughly 50%) to build and sell quickly.

Developers who started projects during a low-interest rate period are now delivering units in a high-rate environment, leading to challenges at closing. However, today’s purchasers are stress-tested to ensure they have financial capacity to service debt. This is reflected in lower levels of mortgage arrears compared to the 1990s.

The Toronto Census Metropolitan Area (CMA) condominium apartment market is experiencing declining sales, rising inventories, project cancellations, and a growing number of investors encountering financial distress due to falling prices. As a result, many are looking to the past for clues about where the market might be headed. This report compares current market conditions in the condominium apartment sector with those of the late 1980s and early 1990s. While there may be similarities, history doesn’t always repeat itself (Figure 1).

We find several major differences. These include a more diverse and stable economy, stricter lending rules that have discouraged speculative building and an underlying shortage of homes based on demographics.

On the surface, the present context appears reminiscent of the late 1980s and early 1990s

After the COVID-19 pandemic, Toronto’s economy rebounded sharply, driven by growth in the finance, technology and healthcare sectors. Similarly, the latter half of the 1980s witnessed a sustained economic recovery following the recession during the earlier part of that decade. In both periods, economic expansion and tight labour markets contributed to rapid, immigration-led population growth in the Toronto CMA.1

The economy began to run hot during both periods, with strong population growth further contributing to demand. Consequently, inflationary pressures began to mount — broadly but especially in housing. Real home prices in the Toronto CMA averaged annual growth of 13% in 2020 and 2021, while they doubled in just 4 years by 1989. Rapid price growth bolstered investor enthusiasm for the condominium market, especially in the late 1980s. To tame inflation, the Bank of Canada began raising interest rates.

In both periods, rate hiking cycles weakened the market. As a result, new condominium investors struggled to sell at profitable prices. At the same time, existing condominium sales dropped sharply, valuations fell and the number of unsold units rose.

While these represent some parallels to the prolonged slump of the 1990s, that period may not offer the most reliable guide for what lies ahead due to several key differences.

The condominium downturn in the 1990s unfolded during a severe recession

The latest episode of inflation (2021 – 2022) prompted an aggressive cycle of interest rate hikes. While this slowed Toronto’s economy, it did not push it into recession. More recently, trade tensions have raised economic uncertainty and exposed pockets of weakness. However, overall employment has remained stable and rising incomes continue to sustain consumption and debt servicing. Looking ahead, we expect a mild recession, with similarly modest impacts on the housing market.

In contrast, the early 1990s saw a severe, 2-year-long recession triggered by Bank of Canada interest rate hikes (Figure 2). This downturn impacted interest-sensitive sectors and constrained fiscal spending.2 It also led to the steepest employment drop since the Great Depression. Even after the recession eased, Toronto faced sluggish private-sector job growth, technological disruption and industry shifts driven by free-trade policy.

Lessons from the past have strengthened lending practices

Today’s condominium market benefits from a more stable economic backdrop. It is also supported by stringent lending standards, shaped by lessons learned during the 1990s and the 2008 sub-prime mortgage crisis in the United States.

To satisfy equity requirements for construction loans, a condominium developer today must sell at least 70% of pre-construction units before funding advances. This is a significant increase compared to the 1980s when the requirement was as low as 50%, according to market intelligence. Our analysis (PDF) has shown that when construction begins on structures, developers have typically sold 80% of units. What we are observing in the most recent quarter is consistent with this ratio and those completed had more than 90% absorbed (Table 1).

Today’s homebuyers also face tighter lending criteria. Mortgage underwriting has evolved to ensure borrowers have:

  • greater financial capacity to service debt
  • the ability to absorb interest rate fluctuations (stress test)

This shift is reflected in today’s low mortgage arrears (0.23% as of Q1 20253), which remain well below the levels seen during the 1990s downturn, when arrears rose more quickly and were roughly 3 times higher than today (peaking at 0.68% in Q1 19924).

Table 1: A High Share of the New Condominium Supply Pipeline Is Absorbed
Select Statistics for the New Condominium Market, Toronto CMA, Q2 2025
Stage % Sold* Unsold Units
Pre-construction 45 9,363
Under construction 80 10,450
Occupying 92 835
Registered 93 1,403

*For active projects not sold out (does not include cancellations).
Source: Urbanation

Today’s housing landscape is characterized by limited supply

The condominium market today differs significantly from the 1990s. While a significant amount of new supply is entering the market in a relatively short period, much of it is already sold (Table 1). In contrast, during the 1990s, condominiums were relatively new to Toronto’s skyline. Speculative building was more prevalent and contributed to overbuilding during that period.

We do not assess Toronto’s market as being overbuilt as it was during the 1990s. On the contrary, there is currently a structural shortage of housing, which is expected to help clear any inventory build-up as the market recovers.

The recent surge in condominium prices was largely driven by limited supply, in addition to strong immigration and negative inflation-adjusted interest rates (Figure 3). The current slowdown reflects the impact of higher mortgage rates and adjusted expectations for future immigration levels.

Strong demand remains evident in the rental market, with a record number of condominium apartment rental leases signed in the first half of 2025.5 As the condominium market softens, market intelligence suggests that some condominium developers are increasingly converting projects and unsold units into rentals.

Additionally, competition from new single-detached or row home offerings remains limited, unlike the 1990s when this segment also faced oversupply. Improved health among the senior population has led to more people choosing to age in place (PDF), further limiting supply from the existing home segment of the market. In contrast, the early 1990s saw a younger, more mobile population driving an increase in these listings.