In a discussion on The Hub’s election YouTube show, principal broker at Butler Mortgage Ron Butler sounded the alarm about the rapidly deteriorating Greater Toronto Area (GTA) condominium market—an issue he believes is being ignored by leaders during the current federal election campaign. The conversation painted a troubling picture of a market in freefall, with potentially severe consequences for Canada’s economy.
Here are three key takeaways from their discussion:
- A severe market correction is underway: The GTA condo market is experiencing a dramatic price correction, with pre-construction units purchased at peak prices now facing major valuation drops, creating a crisis for buyers and developers alike.
- Systemic risks are emerging: The crisis is extending beyond condos to commercial real estate, with historically high inventory levels and minimal sales activity threatening broader economic stability.
- Government intervention concerns: Proposed housing solutions like modular home construction and government-built housing face practical limitations, while the scale of the crisis may force some form of market bailout or intervention.
A market built on overconfidence
Butler traced the roots of the current crisis to the 2019-21 period when buyers paid premium prices for pre-construction condos that he estimates were 40 percent higher priced than existing units.
“It’s a classic pricing mistake of frightening magnitude,” Butler explained, comparing the speculative frenzy to historic bubbles like the Dutch tulip mania.
The fundamental disconnect between purchase prices and actual value has now been revealed as construction will be completed on thousands of units over the next 22 months.
The mortgage broker described a perfect storm: buyers who expected to either flip units before completion, or others who hoped to secure high rents, now face a market where condo prices are falling and rental rates are declining across the GTA and Lower Mainland in British Columbia.
With inventory levels at historic highs and sales volumes plummeting, the situation has become dire.
“There were [over 80] sales offices to sell pre-construction condos opened in the last [14] months. They all closed,” Butler noted.
The discussion highlighted multiple layers of risk emerging from the condo collapse. A significant portion of buyers—Butler estimated 20-30 percent and rising—are choosing to walk away from their deposits rather than hang onto overvalued units.
The crisis even extends beyond residential condos to commercial real estate, with Butler noting unprecedented levels of commercial property listings. The broader construction slowdown has left only government and essential retail projects moving forward, signaling deeper economic troubles.
Policy responses falling short
The conversation turned to political responses, particularly Liberal leader Mark Carney’s campaign promise for government-built housing. Carney’s plan would include an entity called Build Canada Homes which would function as a developer overseeing the construction of affordable housing units.
Butler was skeptical. “When was the last time you heard somebody say, I’m just dying to live in government housing?”
He dismissed the 500,000 a year homes built target as unrealistic, noting that Canada lacks the modular home manufacturing capacity to achieve this scale.
The mortgage expert was equally critical of past housing promises, referencing the unfulfilled federal pledge of 3.9 million new homes by 2031.
“We’ll build about 225,000 [per year],” he noted, highlighting the vast gap between political rhetoric and practical reality.
Potential for government intervention
As the discussion concluded, Butler was asked whether the scale of the crisis might force government intervention. While cautious in his predictions, Butler acknowledged that with potentially 15,000 or more units sitting empty, political pressure for action would mount.
He said possible responses could include government purchases of distressed properties at discounted prices, either for conversion to public housing or temporary rental use. However, he warned that any intervention would need to be carefully structured to avoid simply transferring losses to taxpayers.
Generative AI assisted in the production of this summary. If you are quoting from or referencing this summary, please refer to the audio to verify.
