Why Toronto’s Condo Presale Model Is Failing — And Why It Could Change the Future of Housing

The Toronto condo presale model is under increasing pressure as developers struggle to secure financing in today’s changing housing market. While higher interest rates and cautious buyers have played a role, many experts believe the biggest issue lies in how new condominium projects are financed.

Toronto’s condo market isn’t just experiencing a slowdown—it’s exposing a structural problem that’s been building for years.

While many people blame high interest rates, falling prices, or cautious buyers, industry experts say the biggest obstacle is actually how condos are financed before construction even begins.

The traditional presale model that has fueled Toronto’s skyline for decades is no longer working in today’s market, and many believe it’s time for a complete overhaul.

How Toronto’s Condo Presale Model Works

Before most condominium projects can secure construction financing, lenders typically require developers to sell approximately 70–80% of the building through presales.

These buyers place deposits years before construction is completed, allowing lenders to reduce their risk while providing developers with the confidence to move forward.

For years, this system worked exceptionally well because:

• Investors eagerly purchased units before construction.
• Home prices were consistently rising.
• Financing was inexpensive.
• Buyers expected strong appreciation before occupancy.

Today, those conditions have changed dramatically.

Why Developers Are Struggling to Reach 80% Presales

Toronto’s condo market has shifted significantly over the past few years.

Several factors are making it increasingly difficult for developers to hit the required presale threshold:

Investor demand has declined

Many investors have stepped back due to:

• Higher borrowing costs
• Lower rental profitability
• Softer resale condo prices
• Increased carrying costs

Without investors purchasing large portions of new developments, sales centres simply aren’t seeing the same level of activity.

Buyers have more uncertainty

End-users are becoming more cautious as they wait to see where:

• Mortgage rates go
• Home prices settle
• Inflation continues to trend

Many prospective buyers would rather purchase an existing condo they can move into immediately than commit to a property that may not be completed for several years.

Falling prices create hesitation

When prices are rising, buyers feel pressure to purchase early.

When prices soften, many buyers choose to wait.

That hesitation makes reaching the required presale numbers much harder than it was just a few years ago.

The Result: Fewer New Condos Get Built

When developers cannot achieve the required presale threshold, many projects are delayed—or cancelled altogether.

That creates a long-term problem.

Toronto continues to experience strong population growth, yet fewer new housing projects are moving forward. This risks creating another future supply shortage once demand strengthens again.

Ironically, today’s slowdown in construction could contribute to higher prices several years from now if housing supply fails to keep pace with population growth.

A Different Model Already Exists Around the World

Some housing experts believe Canada should consider moving away from its heavy reliance on presales.

Cities including Paris, Tokyo, and New York often allow developers to obtain financing and build projects before selling many—or all—of the units.

Instead of relying almost entirely on presale buyers to unlock financing, developers assume more of the initial risk and sell completed homes once construction is finished.

Advocates argue this approach could:

• Increase housing supply
• Reduce project cancellations
• Give buyers the opportunity to purchase a completed product instead of buying years in advance
• Create a more resilient development industry during changing market conditions

However, adopting this model would also require lenders, developers, and governments to rethink how large residential projects are financed and managed.

What This Means for Buyers

For buyers, today’s market presents opportunities that haven’t existed for several years.

Existing condo inventory has increased, giving purchasers:

• More selection
• Greater negotiating power
• Less competition
• More time to make informed decisions

Meanwhile, fewer future condo launches could eventually reduce new supply, particularly if demand rebounds as borrowing costs stabilize.

What This Means for Sellers

Condo sellers should recognize that today’s market is highly competitive.

Pricing accurately, presenting the property well, and implementing a strong marketing strategy are more important than ever.

Properties that are well-prepared and realistically priced continue to sell, while overpriced listings often remain on the market much longer.

Looking Ahead

Toronto’s housing challenges extend beyond interest rates.

The current presale financing model was designed for a market driven by rapid appreciation and strong investor demand. As market conditions evolve, many industry professionals believe the system itself may also need to evolve.

Whether Canada eventually adopts a build-first, sell-later approach remains to be seen, but one thing is becoming increasingly clear:

The future of Toronto’s housing supply may depend as much on financing reform as it does on interest rates.

For buyers, sellers, investors, and developers alike, understanding these structural changes will be essential as the GTA real estate market continues to evolve.

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Frequently Asked Questions

Why do Toronto condo developers need 80% presales?

Most lenders require developers to sell approximately 70–80% of a project’s units before providing construction financing. This reduces lending risk and demonstrates sufficient buyer demand.

Why are condo pre-sales slowing down?

Higher interest rates, declining investor activity, increased inventory, and softer condo prices have made buyers more cautious, making presale targets harder to achieve.

Could fewer condo launches affect future home prices?

Yes. If fewer projects begin construction while Toronto’s population continues to grow, limited future housing supply could place upward pressure on prices over the long term.

Is now a good time to buy a condo in Toronto?

It depends on your financial goals, but many buyers are benefiting from increased inventory, greater negotiating power, and less competition compared to previous years.