The condo collapse you won’t see on the front page

Ontario’s condo market isn’t crashing loudly, it’s melting quietly, deal by deal.

I still recall the first call.

It came from a young investor I met a few years earlier at one of my real estate workshops. Back then, he was full of confidence, the kind that only a hot condo market can give you. He had purchased a pre-construction unit in downtown Toronto, put down a modest deposit, and thought he would flip it, or rent it out for a good profit.

“Jay,” he said, his voice noticeably different this time, “My unit is closing… and I don’t think I can afford it.”

That conversation has occurred more times than I can count in the past year.

What we’re seeing in Ontario’s condo market right now isn’t just a slowdown. It’s a reckoning, and the toughest part is happening at the closing table.

If you walk through downtown Toronto, Mississauga, Vaughan, or even parts of Hamilton, you can feel it: cranes everywhere, glass towers rising in every direction. For years, we celebrated this as progress: more housing, higher density, more opportunities.

Here’s what many people didn’t fully understand: many of those units were built for investors, not residents. Small one-bedroom and micro-units were made to flip or rent. Now that so many are finished, they are sitting on the market.

In rising markets, we often forget that the purchase price in your contract isn’t the amount a bank will use to determine your mortgage. At closing, the bank orders an appraisal, and in today’s market, these appraisals are often below the original contract price. That means buyers suddenly owe significantly more cash at closing than they expected.

I heard from another buyer who purchased a pre-construction unit in 2021. At that time, the hype was all about future growth and big returns. Fast forward to closing; the appraisal came in $400,000 below what he had agreed to pay. The bank wouldn’t lend based on the higher price, and suddenly he faced a tough choice: find hundreds of thousands of extra cash or walk away and forfeit his deposit. Across the GTA, appraisal shortfalls of 10% to 30% are becoming common, especially for pre-construction condos bought at peak prices.

Developers rely on these deals to close. Pre-sales and scheduled closings often generate the cash flow that keeps cranes moving, workers paid, banks satisfied, and projects on track. Without enough buyers closing, developers face higher financing costs, stalled loans, or even default risk, all while construction expenses and interest payments continue to rise.

I’ve spoken with buyers who felt confident when they signed their agreement. They had income, savings, and trust in the market. If the bank refuses to finance the initial price and you can’t cover the difference, you might have to walk away and face a significant loss. When you default on a sales contract, the seller can sue for damages. As a result, some buyers are turning to higher-interest lenders just to close the deal. Every deal that falls through pushes another unit back onto the market at a lower price, which increases downward pressure on the entire segment.

Every market cycle offers lessons, sometimes the tough way. The condo market in Ontario didn’t crash with a big headline. It slowly grew, helped by years of cheap credit and rising prices. Today’s condo market shows us something important: a good contract doesn’t always mean a good investment, and an appraisal still counts.

For buyers and investors, it’s a reminder to always stress-test deals, understand how appraisals work, and prepare for the unexpected. For developers, it’s a warning that risk is shared, not just between builders and banks, but also between sellers and buyers.

For all of us watching Ontario’s housing story unfold, it’s another chapter in the real estate cycle, one that’s teaching a generation that math matters as much as the dream.