Toronto Condo Market Truth
Exposing Fatal Flaws in CMHC’s “Soft Landing” Prediction: When optimism meets reality, what do the numbers really tell us? A critical analysis based on 2025 population and market data
CMHC’s “Soft Landing” Confidence
CMHC’s report exudes confidence, using two key factors to support their “market won’t crash” conclusion. But do these arguments hold up against reality?
“Several factors point to a softer correction and a less severe outlook than the 1990s crash. Strict regulatory standards and structural housing shortages will protect the market from catastrophic decline.” – CMHC Official Report
CMHC’s Arguments:
- Higher Pre-Sale Thresholds: Developers need 70% sales for financing (vs 80s’ 50%)
- High Project Sales Rates: 80%+ at groundbreaking, 90%+ at completion
- Extremely Low Default Rates: Q1 2025 only 0.23% vs 90s’ 0.68%
- Stress Test Protection: Buyers can handle interest rate volatility
CMHC believes these strict standards have already “absorbed” most supply, with banks facing minimal risk.
CMHC’s Arguments:
- Record Population Growth: 2024 reached 3.9%, adding 268,000 people
- Hot Rental Market: H1 2025 set historical records
- Structural Shortage: vs 90s’ overbuilding
- Developer Adaptation: Unsold units converted to rentals balance market
CMHC firmly believes strong demand will rapidly absorb inventory, supporting smooth market transition.
However, the latest data tells a completely different story…
CMHC’s analysis is based on 2024 historical data, but 2025 reality has fundamentally changed. When optimistic predictions meet harsh reality, which is more credible?
1990s Shadow: Disturbing Similarities
CMHC acknowledges similarities between current conditions and the 1990s crash, but believes key differences will ensure a safe landing
1990s Characteristics
- Population Growth: 3.3% in 1989
- Price Surge: Doubled in 4 years
- Bank Rate Hikes: Aggressive anti-inflation policy
- Economic Expansion: Finance, healthcare, tech booming
- Speculative Frenzy: Low rates driving irrational buying
2025 Characteristics
- Population Growth: Record 3.9% in 2024
- Price Surge: 13% average in 2020-21
- Bank Rate Hikes: Similar aggressive tightening policy
- Economic Expansion: Same sectors driving growth
- Speculative Bubble: Pandemic low rates triggered frenzy
Key Similarity Analysis
The similarities between both periods run deeper than CMHC acknowledges:
- Macroeconomic Cycles: Both experienced economic recovery from lows, followed by overheating and central bank intervention
- Population Growth Patterns: Immigration-driven demand surges, followed by policy tightening
- Investment Psychology: FOMO-driven irrational exuberance
- Policy Reversals: Sharp transitions from stimulus to restraint
These similarities are concerning, especially considering 2025’s dramatic population growth slowdown.
Population Growth Stagnation: CMHC’s Fatal Flaw
2025 Canada’s population growth nearly zero, completely overturning CMHC’s “strong demand” assumption
“In Q1 2025, Canada’s population increased by only 20,107 people, a growth rate of 0.0% – the slowest quarterly growth since the 2020 pandemic. Q2 continued near-zero growth with only 47,098 additions, a 0.1% rate.” – Statistics Canada
| Period | Population Growth | Growth Rate | Non-Permanent Resident Change | Housing Market Impact |
|---|---|---|---|---|
| 2024 Full Year | +268,911 people | 3.9% | Large influx | Strong demand |
| 2025 Q1 | +20,107 people | 0.0% | -61,111 people | Demand collapse |
| 2025 Q2 | +47,098 people | 0.1% | -58,719 people | Continued weakness |
| Unemployment Rate | 7.1% in August | Highest since 2016 | Job market deterioration | Reduced purchasing power |
Key Data Comparison:
- 2024: 3.9% growth, CMHC’s prediction basis
- 2025 Q1: Growth rate plummeted to 0.0%
- 2025 Q2: Only 0.1%, historically low
- Non-Permanent Residents: Massive outflow for two consecutive quarters
What This Means:
CMHC’s “strong demand” assumption was built on 2024’s 3.9% growth foundation, but 2025 reality has completely reversed. Population growth stagnation directly weakens housing demand fundamentals.
Outflow Data is Alarming:
- Q1 Outflow: 61,111 people
- Q2 Outflow: 58,719 people
- Total: Nearly 120,000 people left within six months
- Historical Context: Largest outflow since 1971 except during pandemic
Impact on Rental Market:
Non-permanent residents are the primary rental market demand group. The outflow of 120,000 people directly undermines CMHC’s claim of a “hot rental market”.
Deteriorating Age Structure:
- Average Age: Rose from 41.6 to 41.8 years (in just 4 months)
- 65+ Population: Nearly one-fifth of total population
- Some Provinces: Like Newfoundland reaching one-quarter
- Home-buying Demographics: Declining proportion of younger people
Aging not only reduces home-buying demand but may also bring property selling pressure.
CMHC’s Fundamental Error in Prediction
CMHC’s analysis is based on an outdated assumption: sustained strong population growth. But reality shows:
- Population growth crashed from 3.9% to near zero, demand foundation collapsed
- Massive non-permanent resident outflow, rental market under pressure
- Unemployment hits new highs, purchasing power severely damaged
- Population aging, home-buying demographic shrinking
Conclusion: The market lacks people who can afford homes, not homes themselves!
Inventory Truth: The Heavy Reality of 55,000 Units
If CMHC is correct about “housing shortage,” why are there over 55,000 condos for sale in the GTA?
Q2 2025 GTA Total Condo Supply Exceeds 55,000 Units
New Unsold Condos (Developer Inventory)
≈24,045 Units
Active MLS Resale Listings
≈31,603 Units
At current sales pace, it would take 60 months (5 years) to absorb developer inventory
Inventory Composition Analysis:
- Pre-Sales Unsold: 55% of units can’t find buyers
- Near-Completion: About to be delivered but no takers
- Final Phase Clearing: End-of-project promotional units
- Default Returns: Units returned from investor defaults
Developer Predicament:
Facing cash flow crisis, forced to:
- Cancel or postpone new projects
- Convert unsold units to rentals
- Offer massive cash incentives to attract buyers
- Accept significant price cuts for disposal
MLS Listings Surge:
- Total Listings: 31,603 units at record highs
- Investor Dumping: 70%+ market-dominating investors fleeing
- Price Competition: Widening gap between new vs. resale prices
- Sales Cycle: Average selling time significantly extended
“Shadow Inventory” Risk:
More hidden supply includes:
- Units returned from closing defaults
- Privately negotiated units not publicly listed
- Investor-held properties waiting for right timing
- Rental properties with poor yields preparing to sell
Market Desperation Signals:
“Cash for Keys” reflects harsh market reality:
Scenario 1: Investor Cut-and-Run
- Unable to secure sufficient financing for closing
- Selling purchase contracts at a loss
- Using deposits and losses to “buy” quick exit
- Avoiding developer lawsuit for breach
Scenario 2: Developer Cash Incentives
- Providing $20,000-$50,000+ cash incentives
- Helping buyers bridge financing gaps
- Reducing closing cost burdens
- Ensuring project delivery completion
Either form indicates market liquidity is collapsing
| Inventory Type | Estimated Quantity | Absorption Time | Market Pressure | Risk Level |
|---|---|---|---|---|
| Developer New Inventory | ≈24,045 units | 60 months | Extreme | Crisis Level |
| MLS Resale Listings | ≈31,603 units | 36 months | Very High | Severe |
| Shadow Inventory | ≈5,000-10,000 units | Unknown | Potential | Moderate |
| Total | 60,000+ units | 5-7 years | Historic High | Systemic Risk |
Debunking the “Soft Landing” Myth
Critical analysis based on latest data: Why CMHC’s optimistic predictions don’t hold up
Three Fatal Flaws in CMHC Analysis
While CMHC’s report has data and logic, the “soft landing” conclusion is overly optimistic, ignoring deep market contradictions:
CMHC’s Mistake:
Predicting the future based on 2024’s 3.9% population growth, ignoring fundamental 2025 changes.
Reality Check:
- Population growth crashed from 3.9% to 0.0%
- 120,000 non-permanent residents fled
- Unemployment hit 2016 highs
- Purchasing power severely damaged
Consequence Analysis:
Demand foundation collapse means inventory absorption will be much slower than expected, market adjustment period could last 5-7 years.
CMHC’s Blind Spot:
Over-reliance on “90% completed project sales rate” data, ignoring when these contracts were signed.
Hidden Dangers:
- Contract Timing: Most signed during 2021-2022 market peak
- Valuation Gap: Banks appraise at current market value, far below contract price
- Funding Shortfall: Buyers unable to bridge the difference
- Chain Reaction: Default wave could trigger market panic
Real Evidence:
“Cash for Keys” phenomenon already shows investor cash flow crisis, default risk severely underestimated.
CMHC’s Misjudgment:
Believing “H1 2025 record condo rentals” proves strong demand.
Truth Revealed:
- Supply-Driven: 55% unsold pre-sales forced into rentals
- Weak Demand: Landlords offering 1-2 month rent-free periods
- Actual Rent Decline: Surface price hikes mask real income drops
- Non-Permanent Resident Outflow: Rental demand foundation damaged
Market Signal:
Rental volume increase isn’t strong demand, but desperate moves by developers and investors.
“Toronto’s current condo market isn’t a simple cyclical adjustment, but a liquidity crisis of overpriced assets. The contradiction between high inventory and stagnant population growth shows the market lacks people who can afford homes, not homes themselves.”
Final Verdict: Soft Landing Becomes an Unreachable Myth
Three Reality Shocks Challenge CMHC Predictions:
- Population Growth Stagnation: Demand foundation fundamentally changed
- Historic High Inventory: Unprecedented supply-demand imbalance
- Investor Cash Flow Crisis: Default risk severely underestimated
Only when prices match purchasing power can inventory be absorbed. High interest rates, falling rents, and declining demand have already suffocated investors. If a default wave erupts, the market will face even greater selling pressure.
