A new condo development under construction in Toronto, on Feb. 23, 2023.Chris Young/The Canadian Press
Condominium developers in the Toronto-area have seen an explosion in the number of unsold units in recently completed buildings, driven largely by people who are defaulting on purchase contracts.
“Standing inventory, meaning unsold units in built and occupied buildings, is a growing concern,” said Pauline Lierman, vice-president of market research at real estate analysts Zonda Urban. According to her, among buildings that started selling in 2020 and after, there were 46 units of standing inventory in the fourth quarter of 2023, but in the same quarter in 2024 the number had ballooned to 364, a 691-per-cent increase.
That doesn’t tell the whole story though. There are older projects that were still selling and constructing over that same period, and the total current standing inventory of all types is closer to 1,200 units, a number she expects to jump again. “With a market that is barely moving, standing inventory could double by the end of the year: for projects we have occupying between now [March] and December, 2025, there are 2,101 units unsold,” she said.
Ms. Lierman’s figures put the standing inventory at about 8 per cent of everything that’s been recently completed, but according to those who work in the assignment market – where buyers try to flip contracts for incomplete condos – the percentages of those trying to get out of soon-to-finish condo buildings is often closer to 10 or 20 per cent.
“The defaults are very high, and many people cannot close,” said David Feld, a lawyer with Feld Kalia Professional Corp., who said many of his clients are staring at contracts asking them to pay 20- to 30-per cent more than the current fair market value for resale condos. “Some don’t even want to close,” he said. “I’ve spoken to wealthy people with money who don’t want to close. They calculated it’ll take five to seven years to recoup those losses, so let’s take the hit now,” he said.
For high-end condos, the losses can be dramatic. Ari Zadegan, broker of record for Re/Max Hallmark Ari Zadegan Group Realty, said she spoke to one preconstruction investor who lost $700,000 trying to get out of a contract to buy a luxury condo for $3-million. According to her, the hardest part for most preconstruction investors is accepting they are going to lose more than just their deposit.
“It’s rough,” she said. “It’s not easy to lose $200,000 or $500,000. But they have to come to terms with the loss. Mentally, they need to be prepared.”
The Zadegan Group currently has three assignments listed on Facebook groups and other online marketplaces for 11 Yorkville, a luxury project by Metropia and Capital Developments closing in the next few months. One two-bedroom, one bathroom, 610-square-foot unit is being marketed with the original buyer accepting a $590,000 loss. That means the buyer isn’t just losing their entire deposit; they will have to pay several hundred thousand dollars extra just to get someone to take on the contract at close, at current market rates.
“The going rate in Yorkville, at most, is around $1,400 per square foot, and that is pushing it,” said Ms. Zadegan. She notes that, for 11 Yorkville, the units on the highest floors were selling for as much as $2,400 per square foot at the peak of the condo market in the early 2020s. For the seller, it’s a disaster. But for a new buyer, it could work out okay, she said. “When there’s that much loss, and it’s deflated to a price that it should be, they are buying a good deal.”
As developers face the prospect of holding on to more and more inventory, Mr. Feld and Ms. Zadegan are finding increasing intransigence about working with buyers trying to avoid financial catastrophe.
“There are some [developers] that will work with you,” said Ms. Zadegan. “[But] there are many actually gouging the buyers when they are down on their knees. Honestly, that’s unethical.” She refers to developers that add extra fees for contract extensions, for adding more buyers to the title and, in some cases, developers that refuse to agree to a sale if the price is below their initial contract price, even if there are no takers at a higher price.
“Every letter of default says, ‘We will sue,‘” said Mr. Feld, who notes that preconstruction buyers who default face not just losing deposits, but could be liable for damages up to as much as the difference between the final selling price and the original contract price (and also that developers have two years to decide whether to sue at all). Mr. Feld argues the aggressive tone might have been justified when defaults were exceptionally rare, but these days they might be close to 10 per cent of all buyers.
“They should work with agents and clients and lawyers and wake up to the reality of your purchasers; who in good faith supported you while you were building. They trusted you and stayed with you during delays, and you are treating them like cattle,” said Mr. Feld. “The builders should be more lenient; we all feel builders are tone-deaf when it comes to the reality of closing, and not acting in good faith.”
Especially galling to Mr. Feld and others is when builders eventually sell those defaulted and unsold standing inventory units at a discounted price than what they demanded from preconstruction buyers.
“There are some builders that do in-house rentals, but not everybody will be able to rent those out,” Ms. Lierman said. “I see several developers now moving into occupancy in the spring here; a couple of developers are slashing the pricing on units that are left. That’s how you see that attrition downwards.”
An example of sliding prices can be found at 500 Dupont St. – known as Oscar Residences by Lifetime Developments – a 155-unit building that according to data provided by TalkConda.ca launched at $1,374 per square foot in March, 2021, and hit a peak of $1,542 per square foot by May, 2021. However, the most recent sales at the building have been at $1,223 per square foot in February this year. In the months since the building completed construction in the summer of 2024, there have been more than 50 listings terminated on local MLS systems (according to data from HouseSigma.ca) with only three units sold: one for $220,000 less than its initial asking price (dropping from $1,095,000 to $875,000) 233 days after it was first listed.
Mr. Feld’s prediction for the growing stock of standing inventory is stark: “Those units are going to stay vacant.”
