At the corner of High Park Avenue and Annette Street in Toronto, a church slated to be transformed into condominiums has been sitting partially complete for several years.
Construction on the 70-unit condo project began in 2019, but there has been no progress since 2023.
“We all knew that something was wrong because you’d just drive by and no one’s working, right? Nothing’s happening,” said Phil Earnshaw, who paid a $280,000 deposit in 2018 for a two-bedroom unit.
The project went into receivership last year and was sold this summer to another developer. It means buyers, like Earnshaw, who paid deposits for units before construction began won’t be getting those units after all and are now waiting to get their deposits back.
The stalled High Park development is just one example of a number of condo projects throughout Toronto that have been cancelled or entered receivership, and the number is expected to grow.
A report from the Canada Mortgage and Housing Corporation (CMHC) this week highlights a continuing slump in condo construction in Toronto. Meanwhile, real estate consulting firm Urbanation has tracked nine cancelled projects in the city so far this year. That’s on track to meet last year’s total of 11 cancelled projects, or 2,581 units, and Urbanation expects the trend to grow in the upcoming quarters, as many projects struggle with sales.
Why the condo market is plummeting during a housing crisis
According to Urbanation, previous peaks in the number of cancelled condo projects were in 2021, when 2,153 units were cancelled, and in 2017, when 1,809 units were cancelled.
The reasons for cancelled projects have shifted, according to Michael Niezgoda, the company’s senior manager of market research and development.
He says those previous peaks had to do with individual developers facing financial difficulties, “whereas what we’re seeing today is more of a wider market trend where [there is] basically the absence of buyers in the markets, rising costs.”
This week’s CMHC report highlights that condo starts in Toronto “plummeted” in the first half of this year and are the biggest contributor to the overall fall in housings starts, which hit their lowest point since 2009.
Generally, 70 per cent of units need to be sold pre-construction in order for developers to secure financing. According to Niezgoda, Urbanation is currently tracking 16 projects — totalling 5,045 units — in Toronto that launched more than a year ago that have sold less than 40 per cent of units. That’s in part why Urbanation predicts the number of cancelled projects will continue to grow.
According to the CMHC report, investors have been some of the main buyers of pre-construction condo units in recent years, but they’re now increasingly turning away from them due to decreased profitability.
When Earnshaw and his wife signed a purchase agreement in 2018 for the unit at 260 High Park Ave., they had considered renting it out until they were ready to downsize themselves.
“Everything’s changed since then and the math doesn’t work anymore at all,” said Earnshaw, “So we’re quite happy to get our money back.”
Earnshaw may not be alone among pre-construction buyers for whom a cancelled project is not all bad.
Some who bought in a hot real estate market a few years ago may now find the units are no longer worth what they expected.
Real estate lawyer Bob Aaron says he gets calls multiple times a week from people facing that scenario.
“For contracts that were signed during and after COVID, the values have gone down and buyers should be quite happy to get out of the deal [if a project is cancelled,] because they won’t have to pay the high prices that they signed for during COVID.”
Aaron says he expects pre-construction condo sales to continue to be slow for the next few years. Though he notes it won’t last forever.
“Markets go up, markets go down, and sooner or later condos will be hot on the market again.”
