In bustling urban areas like Toronto and Vancouver, condos have long dominated the housing scene. A recent CIBC Capital Markets analysis questions if this dominance is fading amid rising purpose-built rentals and market shifts. As a real estate brokerage committed to guiding clients through these changes, we break down the key facts to help you understand what this means for buyers, sellers, and investors in city centers.
The Current State of Urban Condo Markets
Condos have been a cornerstone of urban growth, especially in the Greater Toronto Area where they accounted for roughly 60% of all construction starts over the past two decades. This dominance extended to rentals, with condos making up more than 80% of new units added to the market. However, recent trends show cracks in this foundation.
New condo sales in the GTA have plummeted to levels not seen since the early 1990s, marking the fourth year of a downturn. Unsold inventory peaked at around 25,000 units before starting to decline, while resale prices have dropped 19% from their Q1-2022 high. The sales-to-new listings ratio sits at about 35% in Toronto and 40% in Vancouver, signaling buyers' markets in these hubs. These figures highlight a sector under pressure, but one that remains vital for overall housing supply.
The Rise of Purpose-Built Rentals
A significant shift is underway as purpose-built rentals gain momentum. Housing starts for rentals have overtaken condos since late 2023, driven by increased demand, government incentives, and institutional investments. In contrast to the condo slowdown, rental construction is surging, with starts reaching historically high levels in regions like Quebec and Alberta.
This trend represents a realignment in urban housing. For example, to fully replace condos' role in the GTA, rental starts would need to triple their current pace. Factors like lower land costs and targeted policies are fueling this growth, potentially reshaping city skylines away from condo-heavy developments.
Factors Challenging Condo Dominance
Several elements are contributing to this potential end of condo supremacy. Affordability has improved for condos, with their price discount relative to other housing types hitting 45% in 2025, the highest since 2016. Yet, market share for condos in resales has dipped below 27% over the past year, a four-year low.
Investor sentiment plays a role too. Negative cash flow and falling prices have sidelined many, but signs of recovery emerge in segments like units under $500,000, where sales rose 47% in the first half of 2025. Luxury sales above $2 million remain steady, and private equity groups are snapping up unsold blocks.
Looking ahead, condo completions are projected to fall to multi-decade lows by 2026, as launches and starts have already dropped sharply to about 5,000 units in the past four quarters. This supply crunch could stabilize prices, but it also underscores the growing reliance on rentals to fill gaps.
Structural Changes on the Horizon
The condo market is evolving beyond its peak era. Average project sizes have grown to 250 units in recent years, while unit sizes shrank to around 650 square feet. Experts predict a reversal, with a focus on design, livability, and end-users rather than speculators. This shift could lead to fewer tiny units and more family-friendly options, adapting to long-term renter needs.
Rents, down about 10% from 2023 highs due to temporary supply spikes, are expected to rebound as completions slow. Historical patterns show an inverse link: higher condo completions slow rent growth, while lower ones accelerate it. With population growth outpacing projections, demand for urban rentals will likely intensify.
What This Means for Urban Real Estate
Is the condo era truly over? Not entirely, but its supremacy in urban centers like Toronto and Vancouver appears to be waning. Purpose-built rentals are stepping up, offering a more stable alternative amid condo market volatility. For investors, this could mean pivoting to buy-and-hold strategies in rentals for better tax advantages and cash flow.
Buyers and sellers should watch for further price adjustments, potentially another 5-7% drop, alongside interest rate cuts to reignite activity. Confidence will be key to recovery, but the numbers suggest a leaner, more balanced market ahead.
At Coldwell Banker Horizon Realty, we stay ahead of these trends to provide clear guidance on urban housing options. If you're considering buying, selling, or investing in city properties, reach out to discuss how these insights apply to your situation.
The content of this article is for informational purposes only and should not be considered as financial, legal, or professional advice. Coldwell Banker Horizon Realty makes no representations as to the accuracy, completeness, or suitability of the information provided. Readers are encouraged to consult with qualified professionals regarding their specific real estate, financial, and legal circumstances. The views expressed in this article may not necessarily reflect the views of Coldwell Banker Horizon Realty or its agents. Real estate market conditions and government policies may change, and readers should verify the latest updates with appropriate professionals.
