Toronto Condo Market Struggles — Foreign Worker Visa Cuts Impact

Toronto Condo Market Struggles — Foreign Worker Visa Cuts Impact

Toronto’s condominium market is in a freefall that nobody saw coming — or rather, plenty of people predicted it and were largely ignored. Sales of new condo apartments in the Greater Toronto Area plunged 69 per cent in the second quarter of 2025 from a year earlier, sliding to levels not seen in three decades. The Financial Post reported this week that the market continues its relentless decline, with small apartments hit hardest by investors fleeing a sector where 77 per cent of new condo mortgage holders were already losing money on a cash-flow basis, according to CIBC and Urbanation research.

The numbers are staggering. In January 2026 alone, condo apartment sales slid 26 per cent year-over-year — the steepest decline of any property type in the region. The 905 suburbs saw condo sales plunge by an even steeper 30.3 per cent. By the end of last year, there were 3,897 completed and unsold condo units sitting on the market, up 131 per cent from a year earlier and five times higher than 2023 levels. Another roughly 3,000 pre-sold units were taken back by developers after buyers walked away from deals that no longer made financial sense.

The Immigration Connection

Here is where the story gets interesting. The condo market doesn’t exist in a vacuum, and what has changed most dramatically in Canada over the past two years is immigration policy. The federal government’s decision to slash temporary foreign worker and international student visa quotas has sent shockwaves through every corner of the housing market — but nowhere more violently than Toronto’s condo sector.

CREA economist Shaun Cathcart and TRREB president John Soper have both drawn direct lines between the immigration slowdown and Toronto’s housing market decline. Their analysis points to a straightforward supply-and-demand mechanism that has been playing out in real time: fewer temporary foreign workers and international students means less demand for secondary rental housing, which has historically been a major driver of condo investment purchases.

The connection is not subtle. Toronto’s condominium market is approximately 75 per cent investor-driven, according to TD Economics. Those investors have historically relied on rental income from tenants — many of them foreign workers and students — to justify their purchases. When the government reduced temporary permit caps, that tenant pool began shrinking fast.

The Rental Market Collapse

TD Economics released a report showing that immigration slowdown has pushed new rental unit growth from record highs in 2024 down to just 3-3.5 per cent in 2026. The numbers tell a stark story: without the immigration cuts, rental growth in 2025-2027 would have averaged around 5.5 per cent annually — a full two percentage points higher than what is now projected.

The practical impact on renters is already visible. One-bedroom apartments will cost tenants approximately $1,100 more per year by 2027 than they would have under the previous immigration trajectory. For investors who bought condos expecting to charge premium rents to foreign tenants, this is devastating.

Rent for the average one-bedroom apartment in the GTA was down 5 per cent year-over-year in the fourth quarter of 2024, TD reported. By January 2026, the average unfurnished one-bedroom rent in Toronto had fallen to $1,993 per month — down $156 from a year earlier. Two-bedroom asking rents hovered around $2,800. The purpose-built apartment vacancy rate in Toronto hit 3 per cent for the first time since the pandemic, and condo rental vacancies are climbing as well.

The dynamic is self-reinforcing. Weak ownership market conditions are pushing more condo owners to list their units for rent rather than sell at a loss, flooding the rental market with additional supply. This is rational on an individual level — no one wants to realize a loss — but collectively it puts further downward pressure on rents and investor cash flows. The result is a death spiral for the investor-driven condo market.

The Pre-Construction Crisis

Perhaps the most alarming development has been the collapse of pre-construction condo sales. Since the start of 2024 in Toronto alone, nine projects have been cancelled and eight converted to rental. In 2025, a record 28 condo projects totalling 7,243 units were cancelled — more than doubling the units cancelled in 2024 and surpassing the previous record set in 2018.

Urbanation forecasts that completions will decline further into the post-2026 period due to a collapse in condo construction starts. These starts amounted to just 1,276 units in the second quarter of 2025, down 57 per cent from a year ago and a catastrophic 84 per cent from two years earlier.

This creates what analysts are calling a paradox: the market is simultaneously oversupplied today and heading toward a severe shortage by the end of the decade. The current glut of completed units will eventually give way to a supply drought — but that adjustment is likely years away. Tom Storey, a Toronto-based sales representative with Royal LePage Signature Realty, noted that with relatively few new projects being launched today, there could be a major reduction in supply after 2027 or 2028.

The broader economic repercussions are significant. Real estate is a huge part of the Toronto economy, and when condo construction falls as dramatically as it has, the impact ripples through unemployment figures. As of June, Toronto’s unemployment rate was at 8.7 per cent compared to 6.9 per cent nationally — a gap that construction layoffs have widened considerably.

The Bear Market Confirmed

TD Economics has cut its already bearish forecast, now predicting that by the end of 2025 condo prices will have dropped 15 to 20 per cent from their peak in the third quarter of 2023, with about 10 percentage points of that decline taking place in 2025 alone. The forecast wipes out much of the gain condos made during the pandemic boom, though prices are expected to remain 5 to 10 percentage points above pre-pandemic levels even after the correction.

The TRREB data from May 2026 paints a picture of a market in genuine distress. The average condo price hit $539,400 — down 9.1 per cent year-over-year. The Sales to New Listings Ratio (SNLR) stood at just 37 per cent, well into buyer market territory. Meanwhile, new listings were down 18.9 per cent year-over-year while sales actually rose 5.4 per cent — a pattern that suggests desperate sellers are finally coming back to the market, but prices have further to fall.

Sales in Toronto are down 77 per cent from last year to levels not seen in 30 years, according to Urbanation Inc. The condo sector is simply the most exposed part of that collapse.

The Tariff Factor

Adding to the misery is Donald Trump’s tariff war, which has thrown cold water on the housing market in general. Toronto home sales plunged 23 per cent in April from the year before as buyers, wary of an economic downturn, held off making major financial commitments. The biggest drop across all housing types was the 30 per cent plunge in condo sales.

TD economist Rishi Sondhi noted that the tariff war could leave “scaring on the psyche of households and businesses,” resulting in only a gradual and moderate return to hiring and economic activity. That uncertainty, combined with strained condo affordability, means any potential bounce back in sales and prices will be muted at best.

The Bottom Line for Buyers

So where does this leave people looking to buy or sell in Toronto’s condo market? The answer depends entirely on your situation.

If you are a first-time buyer or someone who actually needs a place to live: The next 12 to 18 months could offer your best entry point in years. TD expects the Bank of Canada to cut interest rates further this year, potentially to 2.25 per cent, which would ease monthly costs. With prices already down significantly from their peak and sellers under pressure, there is genuine negotiating power on the table. The key is patience — don’t try to catch a falling knife, but do start looking now and be ready when prices stabilize. The market is likely to remain challenged for at least another couple of years, according to Urbanation’s Hildebrand.

If you are an investor: Stay away. The math simply does not work right now. With negative cash flows averaging $597 per month for new condo mortgage holders, falling rents, and a shrinking pool of potential tenants due to immigration restrictions, the investment thesis has been destroyed. The share of homes being bought by investors is on a clear decline, and there is no sign that trend will reverse anytime soon.

If you are a pre-construction buyer facing an appraisal shortfall: You are in the hardest position. With prices declining 15 to 20 per cent from peak, many pre-construction contracts signed at the height of the market are now underwater. Know your options — including contract termination clauses and negotiation with developers who may be more willing to work with you than they were 12 months ago.

If you are a seller: Your choices are limited. With the SNLR at 37 per cent and inventory elevated, you will need to price realistically. Waiting for a “heroic rebound” is not a strategy — TD economists have explicitly said one is unlikely. If you need to sell, price it right and move fast.

The Toronto condo market is undergoing a fundamental reset. Immigration policy changes have removed a key demand driver, pre-construction overbuilding has left the market with excess supply, and economic uncertainty has frozen buyer confidence. The good news for those who need a home is that prices are finally approaching levels where the market can find equilibrium. The bad news is that getting there will take time, and many participants — especially investors — are going to lose money along the way.