2026 GTA Pre-Construction Market Update

Why Today's Slowdown Could Lead to Tomorrow's Condo Supply Shortage

The Greater Toronto Area's pre-construction market has experienced one of its weakest periods on record. But the sharp decline in sales and new project launches could ultimately create a significant shortage of new condominium supply and put upward pressure on prices later this decade.

High-Rise Market Shows Early Signs of Recovery

According to Altus Group, GTA high-rise pre-construction condo sales fell 54% in 2025 to 2,067 units. The first signs of recovery emerged in 2026, with sales increasing 41% to 1,108 units from January through May compared with the same period in 2025.

One reason is the lengthy development cycle. High-rise projects often take approximately seven years from initial sales to final registration. Major land, labour, material, financing, and development costs are committed years before completion, limiting developers' ability to reduce prices without sacrificing margins.

Low-Rise Recovery Is Stronger

The low-rise market can adjust more quickly because many projects take only 18 to 24 months to complete.

Sales fell 37% in 2025 to 3,247 homes but surged 139% during the first five months of 2026 to 3,015 homes compared with the same period in 2025.

New low-rise launches fell 42% in 2025 to 3,992 homes and another 83% during the first five months of 2026. Remaining inventory declined 2% to 5,635 homes by May 2026 after increasing 15% in 2025.

The benchmark low-rise price fell 9% in 2025 to approximately $1.41 million before rising 1% to $1.428 million by the end of May 2026.

The Coming High-Rise Supply Shortage

High-rise completions increased 19% in 2025 to approximately 13,200 units but fell 22% during the first five months of 2026. Today's completions reflect sales made years earlier, meaning the impact of today's weak sales will appear later.

High-rise sales have declined for four consecutive years:

• 2022: Down 33%

• 2023: Down 37%

• 2024: Down 63%

• 2025: Down 54%

Developers typically require 75% to 85% firm sales and substantial purchaser deposits before construction financing becomes available. With sales collapsing, many projects have been unable to move forward.

The result could be a major reduction in high-rise completions beginning around 2028 or 2029. Since developers often need two years or more to secure sufficient sales and financing before construction begins, four years of weak sales could translate into six or more years of dramatically reduced new supply.

Demand Has Not Disappeared

During periods of uncertainty, buyers may postpone purchases rather than abandon them. Following both the 2008-2009 financial crisis and Ontario's Fair Housing Plan in 2017, delayed demand eventually returned, contributing to stronger sales and rising prices.

Several factors are now supporting recovery. The Bank of Canada reduced its overnight rate from 5.0% to 3.25% during 2024 and to 2.25% by the end of 2025. Interest rates are expected to remain relatively stable, governments are reducing lot levies, political uncertainty eased following the April 2025 Federal Election, and Enhanced HST rebate programs have improved affordability for qualifying new homes.

The enhanced 13% HST rebate has already helped accelerate low-rise sales, while high-rise sales are beginning to benefit as well.

A Short-Term Closing Challenge

Purchasers who bought condos at peak pricing between late 2021 and early 2022 may face appraisal shortfalls at closing. Current appraised values can be 15% to 25% below original purchase prices, potentially requiring additional equity.

RBC has introduced a program accepting the Purchase Price as the appraised value for qualified new high-rise condo mortgage applicants.

Based on my analysis, approximately 16,000 high-rise units were sold during the market peak. If 25% to 35% fail to close, approximately 4,000 to 5,600 units could return to the market. While significant, this would likely be a temporary increase in supply.

Why Developers Remain Cautious

Developers continue to face uncertainty around material costs, labour availability, and construction expenses. Trade uncertainty affects products including steel, glass, HVAC systems, and appliances, while reduced construction activity has caused skilled workers to leave the sector. Builders may therefore continue launching fewer and smaller projects until confidence in long-term demand improves.

The Outlook

The GTA pre-construction market is showing early signs of stabilization, but the consequences of the downturn are still ahead.

High-rise inventory is declining, new launches remain historically low, and four years of weak sales are likely to reduce condominium completions beginning around 2028 or 2029.

At the same time, lower interest rates, enhanced government incentives, and pent-up demand are creating conditions for recovery.

If these trends continue, upward pressure on high-rise prices could begin emerging as early as 2028 and become more pronounced thereafter. Today's market weakness could be laying the foundation for tomorrow's supply shortage.