It's been hard to find a pulse in Toronto's formerly-scorching real estate scene lately, but owners and builders in one particular segment are floundering the most: the condo market.

Once a favourite of investors who happily scooped up the majority of new units, condos as a commodity have become something no one wants to touch while sales numbers and returns plummet — and as an entry-level housing type, remain hard to justify due to the exorbitant price tag for what buyers are actually getting.

The number of condo transactions taking place in the city has fallen to a dreadful 27-year low as of the second quarter of this year, with only 1,688 sold over the three months of Q2, which was 66 per cent lower than the same time in 2023 and 70 per cent below the 20-year average.

And inventory levels keep inching upwards, with investors, 80 per cent of whom are now losing money on their expenditure, unable to simply dump their units for a guaranteed profit as they once could.

The latest figures show a whopping 12 months of condo inventory sitting on the market waiting to be sold — perhaps confusing to those who are hearing from all ends that the region is in a housing crisis, which is moreso an affordability crisis that sellers can't help assuage unless they are willing to absorb a substantial loss.

Toronto currently has 12 months of condo inventory
byu/orossg incanadahousing

In the midst of all of this, developers are getting desperate and slowing down once voracious construction, pressing pause on tens of thousands of units.

Still, the astounding level of supply has people worried about what's next for condos in and around the city while activity for detached homes gradually warms back up.

Some experts, like investment advisor and real estate writer Hilliard MacBeth, feel that the state of the condo segment could "sink the market" as a whole.

"A massive glut of condominium apartments in Toronto threatens to sink the housing market. Condos were gobbled up by aggressive, highly levered speculators as a way of participating in the housing boom with minimal capital outlay. But now those apartments are hanging over a re-sale market with very few buyers," MacBeth wrote in a blog post last week.

A massive glut of condominium apartments in Toronto threatens to sink the housing market.

Condominiums were gobbled up by aggressive, highly levered speculators as a way of participating in the housing boom with minimal capital outlay... #whenthebubblebursts pic.twitter.com/PZFWWkBt4U

— Hilliard MacBeth CIM FCSI® (@hmacbe) August 30, 2024

"Investor-owners are losing money every month, as much as $1,000, and the average loss for those who bought recently is about $600 per month."

He continues to explain how first-time homebuyers have no interest in the micro-condos that are rampantly for sale, and that "few people want to live in" because they were designed with investors in mind.

"These units were built for speculators who had no intention of living in them... in some cases, young people might buy condos hoping that the value would increase, giving them enough for a down payment for the more expensive low-rise dwelling that they preferred. But the glut has put an end to those dreams."

MacBeth and others fear that not even further mortgage rate cuts from the Bank of Canada will solve this dilemma given how towers continue to be designed, built and priced in the city.