Is Toronto’s Condo Market a Repeat of the 1990s, or Heading Towards a More Balanced Recovery?

Toronto’s condominium market has cooled, with sales slowing and new projects facing delays. This shift has led to uncertainties, and has invited comparisons to the early 1990s, when a sharp downturn reshaped the city’s housing landscape. However, a new analysis by the Canada Mortgage and Housing Corporation (CMHC) points to important differences. While acknowledging today’s market challenges, CMHC noted stronger lending rules, structural housing shortages, and resilient demand, and suggested this cycle is unlikely to mirror the severity of the past.

The early 1990s downturn remains one of the most dramatic corrections in Toronto’s housing history. Following years of rapid growth, rising interest rates triggered a sharp reversal: new condo launches struggled to sell, resale activity plunged, inventories swelled, and mortgage arrears spiked. Prices, when adjusted for inflation, dropped substantially over several years.

With today’s market showing some of those same warning signs, from rising unsold units to investors under pressure,  the temptation to draw direct parallels is strong. CMHC acknowledges that the current environment does echo parts of that earlier cycle, especially in the way higher interest rates have dampened buyer sentiment and slowed the flow of new projects.

Economic Context

CMHC’s analysis emphasizes that the economic backdrop today is far less severe than it was in the early 1990s. That earlier downturn coincided with a deep, prolonged recession marked by significant job losses and a steep decline in real GDP. By contrast, while the Bank of Canada’s rate hikes have cooled the economy in recent years, employment and incomes have remained more resilient. CMHC’s baseline outlook anticipates only a mild recession ahead, a far cry from the prolonged economic pain that amplified housing market weakness three decades ago.

Lending Standards and Market Safeguards

Another important difference lies in how projects are financed and how buyers qualify for mortgages. In the late 1980s, speculative development and more lenient lending standards allowed many condo projects to proceed without firm commitments from purchasers. The result was a glut of unsold units when demand dried up.

Today, the landscape is very different. Developers must typically sell about 70% of a building before securing construction financing, and in practice, many projects achieve even higher pre-sale levels before reaching occupancy. On the buyer side, mortgage rules are much stricter, with income and debt service requirements bolstered by stress testing. These safeguards have helped keep arrears exceptionally low, at just 0.23% in the first quarter of 2025, well below the 0.68% peak seen during the 1990s downturn.

Supply, Demand, and Structural Shortages

CMHC also stresses that Toronto’s condo market today faces structural supply pressures that simply were not present in the past. While the number of units under construction remains high, most are already sold or absorbed, with nearly 80% sold in the under-construction stage and 92% at occupancy as of mid-2025. This contrasts sharply with the overbuilding of the early 1990s. Additionally, housing demand in Toronto remains resilient, driven in part by immigration and the limited availability of alternatives to condominium living. 

At the same time, supply pressures are being reinforced by demographic trends, as many older homeowners choose to “age in place” rather than sell, further restricting turnover in the existing housing stock. These conditions are also visible in the rental market, where the first half of 2025 saw a record number of condo leases signed. In some cases, developers have responded by shifting unsold units into the rental pool, ensuring they contribute to meeting ongoing demand rather than sitting vacant.

Looking Ahead

CMHC concludes that while today’s condo downturn shares some surface similarities with the early 1990s, the broader conditions are fundamentally different. Stricter lending practices, structural housing shortages, and steady demographic demand all point to a market correction that is unlikely to repeat the depth or duration of the past crash.

The CMHC’s outlook is for a more gradual and balanced recovery rather than a dramatic rebound. Apartment starts in the Toronto region have already slowed sharply, which will eventually reduce completions after 2026. If demand continues to build while supply tightens, market conditions could firm again in the years ahead. This aligns with other forecasts, which also anticipate a gradual recovery for Toronto’s condominium market and note that reduced new supply in the coming years could eventually lead to tighter conditions.

A Market Adjusting, Not Collapsing

CMHC’s assessment ultimately reframes the narrative. Toronto’s condo market is in a downturn, but it is not replaying the 1990s. The current challenges reflect a cyclical adjustment shaped by higher borrowing costs, not a systemic collapse. With underlying demand still strong and safeguards in place, the city’s condominium sector is positioned for a more measured path forward than history might suggest.