Déjà vu: CMHC says Toronto condo slump echoes 1990s

Key Takeaways:

• CMHC sees a softer correction than the early-’90s crash thanks to stricter lending rules, mortgage stress tests and an underlying housing shortage.
• Developers typically need 70%+ pre-sales; in Q2 2025 about 80% of units under construction were sold (92% occupying, 93% registered). Mortgage arrears are 0.23% vs. a 0.68% peak in 1992.
• Higher rates are cooling sales now, but strong rental demand and falling apartment starts point to completions tapering after 2026, raising the risk of renewed supply pressures later in the decade.

The Whole Story:

Toronto’s condominium market is cooling, but the downturn is expected to be less severe than the crash that followed the late-1980s boom, the Canada Mortgage and Housing Corp. says in a new analysis.

In a report released Sept. 24, CMHC says sales have fallen, inventories are rising and some projects have been cancelled, drawing comparisons to the early 1990s. But the agency points to key differences that should soften the correction: tighter lending rules, borrowers vetted with a mortgage stress test, and a structural shortage of housing that is likely to clear unsold inventory as conditions improve.

Developers now typically must pre-sell at least 70 per cent of units to secure construction financing, compared with roughly 50 per cent in the late 1980s. Market data show about 80 per cent of units in projects under construction were sold in the second quarter of 2025, CMHC says, rising to 92 per cent for buildings in occupancy and 93 per cent for registered projects. Mortgage arrears remain low at 0.23 per cent as of the first quarter of 2025, well below the 0.68 per cent peak recorded in 1992.

While higher interest rates have weakened demand and complicated closings for projects launched during the pandemic’s low-rate period, CMHC says today’s backdrop differs from the severe two-year recession that gripped the early 1990s. Toronto’s economy has cooled but avoided a downturn to date; the agency’s outlook anticipates only a mild recession with modest housing impacts.

Supply dynamics also diverge from the past. CMHC does not assess Toronto as overbuilt: much of the new condo pipeline is already sold, single-family competition is limited, and population aging is keeping more owners in place. Rental demand remains strong, with a record number of condo leases signed in the first half of 2025, and some developers are shifting projects or unsold units to purpose-built rentals.

CMHC notes inflation-adjusted price declines look similar to the 1990s on the surface, but expects a more balanced market ahead. With apartment starts down sharply, completions are projected to taper after 2026. Combined with pent-up demand and anticipated economic growth, the agency warns that concerns about insufficient housing supply could intensify later in the decade.