A new report from CIBC and Urbanation released on Thursday reveals that the majority of condo investors in the GTA are losing money every month as the market faces the most "significant test" since the 1991 recession. 

Although the low-rise market appears to be in relatively good shape, the same cannot be said about the GTA condo market, which, according to the report, is in "recessionary territory with conditions deteriorating to levels not seen in decades." 

What's made the situation even worse is the role of investors in the presale market, which have made up to 70 per cent or more of buyers. 

"The GTA condo market is in a state of economic lockdown. The math doesn't make economic sense from both the demand side (investors) and the supply side (developers), leaving the market at a standstill," the report reads. 

"Prices are too high for investors to buy relative to resale prices, rents, and interest rates, while developers can't lower prices due to high development costs."

As a result, new condo sales have dove off their lowest levels since the late 1990s, and the percentage of pre-construction condos that are pre-sold is at a more than 20-year low of less than 50 per cent. 

The Toronto condo market is in turmoil as sales plummet to a 27-year lowhttps://t.co/aKssM5LbfA

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The report found that in the first half of 2024, 82 per cent of investors in newly-completed condos had mortgages that were cash-flow negative. This is up from 77 per cent in 2023, and a considerable increase since 2020, when only 40 per cent of new condos were in this category. 

Investors who closed on condos in 2023 had an average negative monthly cash flow of $597, which was up from $223 per month in 2022. 

"In a market that still builds relatively few purpose-built rentals, condo investors remain critically important for growing rental supply and contributing to the improvement in overall housing affordability and growth in the GTA economy," the report notes. 

"However, investors have scaled back dramatically on buying new units and those who previously bought presale units reaching completion are finding themselves in increasingly more precarious investment situations by the day." 

The report says that difficult economic conditions for condo investors have resulted in many of them putting their units up for sale, which can be seen through the record-high number of condo listings that are currently on the market. 

"This is a troubling sign for the outlook for rental supply in the region and raises an alarm bell over the necessity to increase purpose-built rental supply," the report concludes.