Toronto’s real estate market is experiencing a notable trend of condo cancellations in 2025, driven by economic pressures and market dynamics. Condo cancellations refer to the termination of pre-construction condominium projects by developers, often resulting in the return of deposits to buyers. This phenomenon, while not new, has escalated in recent years, with significant implications for both the condo sector and the broader market. As of March 21, 2025, data from various sources, including industry reports and market analyses, provides a clear picture of the situation.

In 2024, 14 condo projects in the Greater Toronto and Hamilton Area (GTHA) were cancelled, accounting for 2,805 units, marking the highest number since 2020, when 3,087 units were cancelled across 10 projects. More cancellations are likely in 2025, as some projects remain in receivership or have paused sales, though exact numbers are hard to quantify. This surge is part of a broader trend, with 33 projects affected over the past two years, totalling 6,796 units either cancelled, converted to rental, put on hold, or placed under receivership. Of the 14 projects cancelled in 2024, six were converted to rental, totalling 1,434 units, reflecting a positive sentiment towards rental development in 2024.

Reasons Behind Condo Cancellations

Several factors contribute to the increasing rate of condo cancellations in Toronto. Rising construction costs are a primary driver, with costs escalating by 20% year-over-year due to higher material and labour expenses. This escalation, exacerbated by supply chain issues and economic uncertainty, often renders projects economically unfeasible. For instance, the cost of steel, lumber, and other materials has surged, outpacing the growth in real estate prices, making many developments unprofitable.

Economic uncertainty, particularly following interest rate hikes, has also played a role. The Bank of Canada’s policy rate, cut to 2.75% in March 2025, will not fully alleviated borrowing costs for developers, who face higher financing expenses. This uncertainty is compounded by buyer caution, with the market softening and investors retreating, as evidenced by Toronto’s new condo sales hitting a 28-year low in 2024. Developers, facing slow sales, may cancel projects to cut losses or strategically relaunch them at higher prices later, exploiting market cycles.

Condo Cancellations Impact on the Condo Market

The immediate impact of condo cancellations is a reduction in new supply, which could lead to future shortages. However, in the short term, the market is grappling with an oversupply of existing units. As of Q3 2024, Toronto had 23,918 unsold new condo units, a 16% increase year-over-year. This oversupply is driving down prices, with the average asking price per square foot for new, unsold condos falling to $1,524 in Q4 2024, a 10% decline from the peak in Q3 2022. Projections suggest a further 7.3% price drop in Toronto and 6.1% in GTA suburbs in 2025, reflecting market pressure.

As mentioned earlier, another significant effect is the conversion of cancelled projects to rentals, adding to rental inventory. In 2024, six of the 14 cancelled projects, totalling 1,434 units, were converted to rental, reflecting a positive sentiment towards rental development. This has contributed to declining rents, with average apartment rents in Toronto dropping 7.1% to $2,632 in December 2024, impacting investor profitability as rental income struggles to cover rising costs.

Condo Cancellations Broader Market Implications

The effects of condo cancellations ripple through Toronto’s overall real estate market, creating a buyer’s market with increased inventory and softened demand. As of February 2025, active listings were up 76% year-over-year, reaching 19,536, while the sales-to-new-listings ratio (SNLR) stood at 33%, indicating a buyer’s market. Home prices reflect this shift, with the GTA average dropping 2.2% to $1,084,547 and condo apartment prices down 1.0% to $688,055 year-over-year.

Investors are reevaluating strategies, with many holding properties in a declining market, reducing new investment in pre-construction projects. This caution is evident in Toronto’s worst year for pre-sales since 1996. The federal government may offer tax incentives to boost construction, addressing supply issues.

Legal Protections and Buyer Rights

Buyers of pre-construction condos in Ontario are safeguarded by the Ontario New Home Warranties Plan Act, administered by Tarion. If a project is cancelled, buyers are entitled to a refund of their deposit plus interest, though conditions and timelines may apply. The Ontario government, in 2022, proposed regulations including fines and licence suspensions for developers cancelling projects unethically to resell at higher prices, aiming to protect consumers. However, some critics argue these measures may not fully deter wealthy developers.

Identifying At-Risk Projects

For buyers, identifying projects at risk of cancellation is crucial. Key indicators include:

• Developer’s track record: Research past cancellations or financial issues.
• Project financing: Ensure financing is secured before sales begin.
• Sales pace: Slow sales may signal risk; check unsold unit numbers.
• Market conditions: A softening market increases cancellation likelihood.
• Contract terms: Review agreements for cancellation clauses and buyer rights.

By conducting due diligence, buyers can minimize risks associated with condo cancellations.

Future Outlook and Market Strategies

Looking ahead, Toronto’s real estate market is at a crossroads. The Bank of Canada’s rate cuts may stimulate buyer activity later in the year. Expected new condo sales are projected to rise from 4,800 in 2024 to 6,300 in 2025, suggesting potential recovery. However, developers may launch fewer projects, potentially leading to future supply shortages as demand rebounds.

For buyers, the current market offers opportunities at lower prices, but caution is advised for pre-construction investments. Sellers should adjust pricing expectations, given the 1.6% GTA price drop in Q4 2024. Investors need to balance holding versus selling, considering rental conversions as a strategy, given the positive sentiment in 2024.

Conclusion

Condo cancellations are a defining feature of Toronto’s real estate market in 2025, driven by economic pressures and market dynamics. They reduce new supply, contribute to oversupply and price declines, and shift the market towards buyers, while challenging investors and the construction sector. By staying informed and leveraging strategies, stakeholders can position themselves for success in this evolving landscape.