The economics behind Toronto's condominium freeze

Urbanation just released its Q3-2025 condominium market survey results for the Greater Toronto and Hamilton Area. Last quarter, a total of 319 new condominium apartments were sold across the entire region. This is the lowest quarterly total since Q3-1990 and is 92% below the latest 10-year average for Q3 periods. It also places us on track for the worst sales year in about three and a half decades. But this isn't news to anyone in the industry. And I'll remind you all that, in my view, now is the time for contrarianism, not conformity.

Here's something I found interesting in the data, though, and it ties into the above quote tweet. The average prices for unsold condominiums in Q3 were as follows:

• $1,315 psf for unsold pre-construction suites (i.e. projects in the pre-sale period)

• $1,199 psf for unsold developer-owned suites (i.e. remaining inventory in built projects)

• $867 psf for resales in recently completed buildings

Why do you think there's this gradient? The answer is that these are condominiums of different vintages and, therefore, of different cost structures. Developers generally price projects on a cost-plus basis — meaning if development charges go up (see above tweet), then developers have no choice but to raise home prices to cover their costs. And if the market isn't there at these new higher prices, well then too bad for developers. We don't get to build. The floor is the floor.

In economic terms, what is happening right now is that the marginal cost of producing new condominium homes exceeds the marginal benefit to home buyers (i.e. costs are greater than what the market is willing to pay for new condominium homes). And for this to change, one or both of the following adjustments will need to occur. The cost of building will need to come down and/or the price buyers are willing to pay for new homes will need to go up. Until then, Urbanation will continue to publish gnarly market updates.

But while the market works to find a new equilibrium, I do think it's disingenuous to try and detach the cost of building new homes from end-user prices (which is what the above quote tweet seems to do). Increasing the marginal cost of a good forces prices to rise. In turn, the quantity demanded falls because fewer people can afford it. And if the demand curve also shifts to the left, which is what happened starting in 2022, then the quantity demanded can even approach zero (see second chart).

Pretending we can heavily tax housing and not pay the price doesn’t help anyone looking for more affordable options.

Urbanation just released its Q3-2025 condominium market survey results for the Greater Toronto and Hamilton Area. Last quarter, a total of 319 new condominium apartments were sold across the entire region. This is the lowest quarterly total since Q3-1990 and is 92% below the latest 10-year average for Q3 periods. It also places us on track for the worst sales year in about three and a half decades. But this isn't news to anyone in the industry. And I'll remind you all that, in my view, now is the time for contrarianism, not conformity.

Here's something I found interesting in the data, though, and it ties into the above quote tweet. The average prices for unsold condominiums in Q3 were as follows:

• $1,315 psf for unsold pre-construction suites (i.e. projects in the pre-sale period)

• $1,199 psf for unsold developer-owned suites (i.e. remaining inventory in built projects)

• $867 psf for resales in recently completed buildings

Why do you think there's this gradient? The answer is that these are condominiums of different vintages and, therefore, of different cost structures. Developers generally price projects on a cost-plus basis — meaning if development charges go up (see above tweet), then developers have no choice but to raise home prices to cover their costs. And if the market isn't there at these new higher prices, well then too bad for developers. We don't get to build. The floor is the floor.

In economic terms, what is happening right now is that the marginal cost of producing new condominium homes exceeds the marginal benefit to home buyers (i.e. costs are greater than what the market is willing to pay for new condominium homes). And for this to change, one or both of the following adjustments will need to occur. The cost of building will need to come down and/or the price buyers are willing to pay for new homes will need to go up. Until then, Urbanation will continue to publish gnarly market updates.

But while the market works to find a new equilibrium, I do think it's disingenuous to try and detach the cost of building new homes from end-user prices (which is what the above quote tweet seems to do). Increasing the marginal cost of a good forces prices to rise. In turn, the quantity demanded falls because fewer people can afford it. And if the demand curve also shifts to the left, which is what happened starting in 2022, then the quantity demanded can even approach zero (see second chart).

Pretending we can heavily tax housing and not pay the price doesn’t help anyone looking for more affordable options.

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