Every fall, we publish a magazine called Real Estate INSIGHTS, or simply what we call “Insights” for short.

This is mailed to all of our clients and published on the Toronto Realty Group website.

In August, I shared an article called “Navigating Multiple Representation” by Matthew Morrison,

Up next, a very lengthy article on the history of pre-construction condos in Toronto.

Fair warning: this is a very long read.  But I would like to humbly suggest that, whether you’re a regular TRB reader or you just found this randomly via Google, this is going to be the most complete, honest, and accurate portrayal of the Toronto pre-construction condo mess and how we got here…

The House Of Cards That Was Always Going To Fold

Originally published for INSIGHTS Magazine
September, 2025

I’ve spent fifteen years predicting the demise of the pre-construction condominium industry, and while I was always shocked that people continued to flock to these “investments,” I remain even more stunned that more people didn’t see this coming.

There’s been no shortage of media coverage on the perils, chaos, and tough-luck stories resulting from the pre-construction condominium collapse thus far in 2025, and although I’ve been calling for this house of cards to crumble for over fifteen years, I take no pleasure in what has happened.

But before I trace back the history of the pre-construction condominium industry in Toronto, I need to make one thing abundantly clear and do so without sugarcoating it: this disaster has only just started to take shape.

We’re merely at the beginning of this story, and it’s a story that I believe, when all is said and done, will be compared to the origin of the financial crisis of 2008.  What do condos and mortgage-backed securities have in common?  Well, nothing.  But it’s not the asset that’s similar; it’s the way in which they were dangerously packaged and sold that was the problem.

I’d be remiss at this point if I didn’t make a second thing abundantly clear: I have never sold a pre-construction condominium in my twenty-one years in this business.

That’s something that I’m proud of, but not because we’re sitting here in 2025 looking back at the tire fire that is the pre-construction condominium market collapse, but rather because I’ve always felt that the “model” of preconstruction condominium purchasing and/or investing is completely flawed.  While young, inexperienced Realtors were racing to attend “launch parties,” seeking to be branded “Platinum VIP Agents” by developers, and flogging pre-construction condos for increased commissions and decreased workloads, I was here, all along, writing on Toronto Realty Blog about the perils of the entire pre-construction industry.

But, no, I don’t feel vindicated, justified, or fulfilled now that the genie is out of the bottle.  Instead, I feel the desire to document the rise and fall of the industry to serve as a future warning.  Sadly, it’s not really the house of cards falling down that’s the problem; it’s the fact that the house of cards was built on a faulty foundation to begin with.

Consider that, here in Toronto, condominiums are not built unless they are first sold.

Why?

Well, because developers don’t finance their own projects; they want banks to do it!  And banks won’t just give a developer hundreds of millions of dollars to build a skyscraper and then watch the developer sit back and sell the units at their leisure.  Banks want certainty.  And the only way to get certainty is to sell the condos before they’re ever built.

Wait – how can you sell something that doesn’t exist?  That’s the beauty of selling pre-construction condos!  Offer incentives for people to purchase property that will be built in the future, collect deposit funds, and sell enough units that the bank will advance the funds needed for the developer to build the condo that has already been pre-sold.

The problem with this model was that it had a built-in expiration date.  Amazingly, the ticking time bomb took far longer to explode than critics like myself thought was possible.  But the longevity of this smoke-and-mirrors trick meant that once the timer went off, the spectacle was that much more intense.

My first experience with pre-construction condominiums in this city was a couple of years after I got into the business.  In 2005, I was introduced to a development down at Yonge & Carlton where bachelor condos were being pre-sold for $99,000 each.  It sounds like a pittance now, but it was a pittance even back then, since comparable resale units were trading for $140,000 at the time.  But that made perfect sense at that time, didn’t it?  You could purchase a resale condo then for $140,000 or purchase a condo that would be completed in four or five years for $99,000, while taking on the risk that the project is cancelled, significantly delayed, or that your unit has material defects or changes.

It’s also important to note that, at the time, you could purchase one of these units with a mere 5% deposit, which would take you from signing the contract through to completion.  Consider that over the last decade, developers have routinely sought 20-25% deposits, staggered over time, such as 5% at signing, 5% within 60 days, 5% within 180 days, and 5% at 365 days.  But back in the early-2000’s, you could essentially “reserve” your spot four or five years into the future with only five percent up front!  For this particular project, it meant that a $4,950 deposit was all that was needed to purchase a $99,000 condo for which comparable units were trading at $140,000.

It was a no-brainer! Even if the market declined over the next 4-5 years, and that $140,000 resale condo dropped by 20% down to $112,000, it would still be worth more than the $99,000 that you paid for your pre-con.

That is when pre-construction condominiums made sense, but it didn’t last long.  As with all things that gain in popularity, once the masses began to flock to pre-construction condominiums and the condos became easier for developers to sell, those same developers raised their prices accordingly.

That gap between pre-construction prices and resale prices – the one that, in my opinion, had rewarded the buyer for the risks and the elapsed 4-5 years to complete the project – began to shrink.

The gap kept shrinking until it was non-existent.  Suddenly, you were looking at pre-construction projects where the developer was asking $250,000 for a 1-bedroom condo, but a comparable resale across the street was also $250,000.

It made no sense!

Why would anybody wait 4-5 years for something to be built when they could buy that very same thing today for the same price?  Why would anybody take on the associated risk without any built-in profit or margin of safety?

Eventually, the inherent risks in the pre-construction model began to show.

It was around 2008 that I heard of the first project being cancelled, with deposits being returned to buyers after several years, and those buyers missing out on market appreciation.  A short while later, we watched developers enact this brilliant scheme where they would “cancel” a project and then immediately re-launch it – at an increased price!  Essentially, they were tearing up $250,000 contracts from 2-3 years ago and re-selling them to their “clients” for $325,000, completely legal, per the iron-clad agreements that their crack team of lawyers drafted, and buyers willingly signed.

The “smaller” problems were still problems.  I had a client at Rezen on Frederick Street who bought a pre-construction unit (not through me) and found that, when he went for his first inspection, the developer had moved the location of the HVAC stack from the corner of the room, where it originally showed on floor plans at the time of purchase, to essentially the midpoint in the living space, which completely butchered the layout.  The stack was about 2-feet by 2-feet and protruded from the wall, meaning you couldn’t put a couch there as intended. My client complained to the developer, but they basically said, “Read your contract; we can change any mechanical systems in the unit, without notice.”

I heard from a Toronto Realty Blog reader who said she had purchased a 700 square foot condo with a 300 square foot terrace, but when she was brought in for her pre-delivery inspection, there was no terrace at all!  She thought it was a mistake or a trick, but she was told by the developer, “The terrace is, by definition, ‘exclusive use common elements’ and you don’t own it.  This is subject to change without notice.”  That terrace might have been “worth” $50,000, and the developer simply took it away.

Ask the buyers in Emerald City Condos in North York how they felt when the project, which was marketed with “direct access to the subway,” was completed without any access to the subway at all! Call this a bait-and-switch, but a developer simply calls it par for the course, fair game, and all part of the process of building pre-construction condos in Toronto.

These horror stories are a dime a dozen, and while on their own, they’re significant, they collectively serve to explain that pre-construction condominium buyers did take risks when purchasing!  For this very reason, I have always felt that this risk should have been rewarded with prices that were lower than prevailing resale.  So when prices rose to pull even with comparable resale, it simply made no sense to me.

Sometime around 2010 or 2011, a crazy thing happened: pre-construction prices rose above that of comparable resale.  When this happened, I thought the whole industry would implode.  It didn’t make sense.  It simply couldn’t be sustained.

But to my absolute amazement, pre-construction condos continued to sell.  People continued to sleep in the street to be first in line for a new development and continued to purchase the “magic beans,” as I called them.

In 2011, after trying for years to explain why pre-construction pricing no longer made any sense, I decided that I needed an analogy that laypeople could understand, and I came up with the idea of using cake.

Buried in the annals of YouTube is a video I shot – on a shaky, hand-held camera, with no microphone, about the concept of purchasing a cake for $10 versus cake-mix for $5.  In the video, I argued that if you could buy cake-mix for $5 and bake your own cake, it might make sense for you to pass on the $10 pre-made cake.  If the prices were even, and both the cake and the cake-mix were $10, then why in the world would anybody spend the time, effort, energy, and extra ingredients to bake a cake themselves?  Then I argued that, if the cake-mix was $14 and the cake was $10, nobody in their right mind would buy the mix over the cake!

The analogy was apt, but the lesson fell on deaf ears.  Pre-construction prices continued to rise, and they were routinely 10-20% above that of comparable resale prices.

In 2015, I tried to make my point again, this time through a lengthy-named video series that I did called, “What If The Whole World Worked The Same Way As The Toronto Real Estate Industry?”

I published seven of these satirical videos, but the very first was about the concept of purchasing “pre-construction jeans.”  If you could buy a pair of blue jeans in a store for $150, then why would you sign a contract to have the denim company make you a pair of jeans, to be delivered in six months, for $200?  I played the protagonist in the video and returned six months later to find that the denim company hadn’t even started to make the jeans, and that the button-fly had been replaced with a zipper, the pants now had three pockets instead of four, and the material wasn’t denim – but rather the pants would be made from used dish-towels.  I argued that if you won’t purchase jeans like this, then there was no reason for somebody to risk hundreds of thousands of dollars purchasing a condo via the same method.

Sarcastic and coy as that video was, it made a point.  Experienced real estate agents in the industry took notice and I found myself aligned with many colleagues who also felt that the pre-construction pricing structure was setting us up for disaster.

In the coming years, we would be inundated with what became perhaps the most significant problem in the pre-construction world to date: cancellations.

I wrote about the infamous developer, Urbancorp, cancelling their King’s Club project when construction was about 80% finished, only for them to return deposits to buyers, and then convert the nearly-completed condo building into rentals.  There were other well-publicized examples of condo cancellations from there, such as the “Museum FLTS” at Bay & Bloor, and years later, Ontario Premier, Doug Ford, would suggest that steps needed to be taken to protect buyers and hold developers accountable.

But pre-construction condos continued to rise in price and buyers continued to purchase them.

Don’t even get me started on the “occupancy period.”  This alone would make a great Netflix special, trust me.  But imagine being given the keys to your “finished” unit on the third floor of a new development while the forty-six floors above you are still under construction?

Yup.

When your condo is finished, the developer gives you “occupancy,” and you start paying the equivalent cost of your mortgage, taxes, and maintenance.  But it could take up to two years for the building to be finished and the condominium corporation to be “registered” so you can obtain a mortgage and/or sell your condo.

This brings up another major pitfall that would play a factor in the collapse in 2025: illiquidity.

You can’t sell what you don’t own.  You don’t own the condo until the building is “registered,” and yet the developer gives you “occupancy” months or years before registration.  Many pre-construction buyers were left paying thousands of dollars per month, waiting for their units to be finished.  Others decided to rent their condos to offset the cost of the “occupancy fees,” and in turn, became accidental landlords.  That opened a whole other can of worms.

While we’re on the subject of cans of worms, is now a good time to mention this little thing called “closing costs?”

No, I don’t mean the standard adjustments that you’d expect when closing on a resale purchase, like legal fees, title insurance, and repayment of any property tax or utilities pre-paid by the sellers. I mean this period where condominium developers essentially passed along heaps of their costs to the buyers in the form of “adjustments” on closing, which were never directly disclosed to the buyers, and often amounted to tens or even hundreds of thousands of dollars.  Imagine purchasing a pre-construction condominium in 2009 for $375,000 only to find that, upon closing, you owed the developer $95,000 in “closing costs?”

Yup. It happened!

Filed under park levies, school levies, development charges, and a host of other expenses that should be paid by the developer, these were charged back to buyers upon closing.

In fairness, these were noted in the sales agreements that buyers signed, but buyers don’t read those contracts, nor would they understand them.  I’ve long maintained that every buyer needs to hire a lawyer to review these contracts during the government-mandated “ten-day cooling off period” which follows the signing of any pre-construction sales agreement, but few buyers do.  They don’t want to spend $3,000 when they feel the ten-day period is an opportunity to “change their mind,” but the fact that it’s government-mandated should tell them that, much like a law that requires people to wear a seatbelt that can save their lives, the government has enacted a law to help protect people from their own decisions.

As history has shown, our real estate market peaked in the spring of 2022, and when the federal government began to raise interest rates, the entire market slowed down. The years 2023 and 2024 would be “transition” years as the market ebbed and flowed, going through various periods of buyer-market conditions and seller-market conditions, depending on the property type, location, and price point.

But while we could make sense of a 5%, 10%, or 15% on-paper decline in value for a house or condo, big or small, we had yet to consider what would become of pre-construction condos purchased between 2018 and 2022 at prices that were upwards of 50% higher than prevailing resale condominiums at the time.

This was the ticking time bomb that was always going to go off. Because if you have people buying a product for more than it’s worth, the market can catch up over 4-6 years. But what if the market doesn’t catch up? And far worse, what if the market declines?

Consider the buyer of a pre-construction condo in King West in 2020 or 2021 who paid a whopping $1,750 per square foot for a unit when comparable resale was trading at $1,200 to $1,300 at the time, which, for the umpteenth time, makes absolutely zero sense, but I digress.  If the market doesn’t go up, this person is going to lose big time.  But what happens when the market turns south, and suddenly resale prices have declined to $1,000 – $1,100 per square foot?  This question is rhetorical, and yet folks who purchased back then never thought to answer it, let alone ask it.

In mid-2024, I began to hear about all the “pre-con closings” that were going to be problematic and many in the industry, myself included, figured that some buyers would refuse to close while others simply couldn’t afford to.

I’m surprised that nobody ever asked this question: “What if the appraised values came in lower than the original purchase price?”

How was this not on anybody’s radar?  What if a buyer paid $700,000 for a pre-construction condo in 2021, which was probably only “worth” $600,000 at the time, only to find that in 2025, the bank’s appraised value came in at $550,000?  In order to obtain a mortgage, the buyer/borrower would need to make up that $150,000 difference out of his or her own pocket.  Many would refuse and others simply didn’t have that kind of money lying around in their couch cushions.

As a slew of pre-construction condos approached the finish line, buyers started to default en masse.  I can’t tell you how many calls I received from desperate buyers who wanted to sell their “condos” when, in fact, they didn’t actually own condos they could sell.

They owned liabilities.  They owned payment schedules.

They were trying to get out of a contract that was designed to keep them tied to the developer in the event that the market didn’t continue to rise, and that’s exactly what happened.  So-called “investors” who purchased these units with no intention of ever closing on them made the assumption that they could simply “assign” the agreement to another buyer, and amazingly, many of these investors had no backup plan!  What if the market didn’t appreciate?  What if you couldn’t assign it?  Would you close?

Shockingly, 2025 has been littered with media stories about buyers who can’t close or refuse to, and many of the buyers who are unable to close will freely admit that when they purchased back in 2018 or 2020, they never intended to close.

What absolute lunacy!  It’s like trying to swim across a lake, having never done so before, but not having any plan in case you can’t make it.

And for those buyers who figured, “I’m going to lose everything I put into this,” it suddenly got a whole lot worse than that!  What’s worse than everything, you might ask?  Well, more.

Consider the buyer of a pre-construction condominium, say, purchased at $600,000, who made $120,000 in deposits, or 20%.  If that buyer throws up his or her hands and says, “I can’t close,” he or she might just walk away from that $120,000 deposit.  But what if the value of the condo has declined by more than just $120,000?  Because this happened, and that’s when developers began suing buyers.

A Toronto Star exclusive in April revealed that there were 130 lawsuits launched by developers, CentreCourt and Mod Developments, brought against buyers who failed to close on pre-construction condos.  The developers were going after the buyers for more than the initial 20% deposits; they wanted the buyers to make up the decline in value, legal fees, closing costs, and more.

The media lined up to interview these buyers, consistently giving them a forum to complain about the “unfair” business practices, but all the while, I continued to argue that these buyers should be accountable for their own actions and decisions.  You don’t walk into a casino, throw down your life savings on the roulette table, and then complain to the pit boss when you lose it all.  So why should pre-construction condominium “investing” be any different?

Pre-construction condominium buying ceased to be “investing” more than a decade ago and essentially turned into “gambling.”  I see no difference between gambling and pre-con investing; they both represent financial bets where you have absolutely zero control over the outcome and where a variety of factors can change the game as you go.

Condominium developers haven’t just been moving the goal-posts over the years; they’ve also been shrinking the nets.  And in 2025, there are tens of thousands of buyers basically trapped in these illiquid investments, all of whom are going to suffer financial hardships that will set them back for years.

Imagine watching your home slowly burn to the ground and not being able to do anything about it.  You have to simply stand there and watch, hoping to preserve some of it, but not sure what, if anything, will be left by the end.  Sadly, or fittingly, that is where the pre-construction condominium market and its participants find themselves today.  These buyer/investors can’t sell their “units,” which are merely contracts, not only because no buyer will touch them, but also because the developer won’t allow them to be sold.

Who would make an investment like this? And why?

I’ve never understood it all, and this isn’t hindsight talking.  I wrote my first article on Toronto Realty Blog about the perils of the pre-construction industry way back in June of 2008 and now, here we are.

2025 is going to be an unmitigated disaster of life-altering financial losses, ugly lawsuits, and continued media coverage on the chaos, and worse is that this is going to continue into 2026.  And these are just the units that were pre-sold and built too.  Current pre-con sales are virtually non-existent, with data showing that new home sales are down 90% from the ten-year moving average.  One of the interesting by-products of this collapse is that, with nothing being pre-sold, nothing will be built, meaning that we’re going to have a massive deficit of condos in 2028 – 2030.

Isn’t that ironic?

And all the while, I wonder if we’ll continue to see this business model – with developers pre-selling condos at tomorrow’s price, and naïve, late-stage investors buying them?  If history is any indication, mankind has never been good at learning from past experiences – especially their mistakes.

One day, maybe a decade or more into the future, we’ll be reading books about how we got to this point in the pre-construction condominium market, and I feel as though the parallel to the 2008 Financial Crisis will be easy to see.  Those mortgage-backed securities were built to fail, just as these pre-construction sales agreements were too.

I’d sure love to read that book. Then again, maybe I’ll just write it myself…

Don’t forget, I warned you about the length of this article!

Thanks for reading, and over the next few weeks, I’ll share the remaining INSIGHTS articles from teammates Chris Cansick and Tara Amina, from my stager, Lucie Brand, and our mortgage broker, Tony Della Sciucca.

If anybody wants a physical copy of our INSIGHTS magazine, email me your address and we’ll add you to the list!