Pt 1. The problem? – New condominium construction
In speaking with surety professionals across Canada, the same anecdote is being echoed across the country – new condominium projects are few and far between. The challenges developers face is no secret. In recent years they have had to battle rising construction costs, an increased interest rate environment, significant development charges and consumers who are staring down a potential recession.
In one of Canada’s largest condo markets, the Greater Toronto Hamilton Area (GTHA), popular research and market insight company URBANATION noted “the new condominium apartment market produced 502 sales in Q2-2025, continuing to break 30-year lows by declining 10 per cent from Q1-2025 and dropping 69 per cent year-over-year. While Q2 normally represents the strongest period of the year for new condo sales, activity this year was 91 per cent below the 10-year average.”
With new and pre-existing sales plummeting, inventory across Canada continues to rise.
In another major metropolitan area, Vancouver, the Canadian Mortgage and Housing Corporation (CMHC) noted a 37 per cent drop in total condominium apartment sales between 2022 and Q1 of 2025.
CMHC goes on to note the environment for both sellers and purchasers of condominium apartments is grim.
Where investors/purchasers had seen double digit price growth in recent years, new downward pricing trends are placing them in precarious financial positions.
In a recent conversation with Aidan Comeau of RE/MAX Hallmark First Group Realty Ltd, we learned the challenges of the condo market are not exclusive to the large metropolitan areas of Canada.
In his home region of Durham, Aidan noted:
“Even out in Durham and Clarington, we are seeing a surplus of condo units sitting on the market for months at a time. The demand is nowhere near the supply right now and we don’t think this will be a short-term issue. Condo sales in the GTA over the last month have dropped 59 per cent from the same time last year and a shocking 90 per cent from the 10-year average.
Now what is causing this disconnect? Millennials make up the largest demographic in their peak household formation stage. What we’ve seen is that they are prioritizing smaller detached homes to which they can add value.
With all that being said, eventually the market will fluctuate and will help absorb the current vacant units as the demand corrects to match the supply. However; this is not an overnight process and we don’t expect to see these corrections begin until 2028.”
Further northeast of Durham, Trevor Myles of Myles Contracting, a residential renovation contractor, is also seeing the desire to invest in improving existing freehold units rather than new build condominium units.
“Personally, I’ve noticed many people shy away from buying fully finished homes. More times than not, people are buying budget friendly homes and then renovating. Not only are they getting a home for a ‘decent’ price, but they also now have money left over to renovate and make the space their own. People have definitely started to reinvest their money in the homes they own. More additions or new structures are something we are seeing a lot.”
When asked specifically about the shift in spending habits in the residential market, Trevor noted he still enjoys a healthy mix of luxury and budget renovation clients.
“For me personally, it’s a 50/50 split. I have some clients that want the best of the best and don’t care what it costs. They want it done to exactly what they envisioned. On the other side, I do have clients that want the more budget friendly option. We treat each job the same whether it is big or small. You don’t cut any corners, you do what you’re suppose to do.”
Pt 2. The answer? – Purpose built rentals
Given the above, it is no surprise we are seeing a rise in the purpose-built rental market in Canada.
In a sperate report, URBANATION notes the GTHA saw 2,136 purpose-built rental completions in Q1-2025, which marked 173 per cent increase “from the same period last year and representing the second highest quarterly total of the past 30 years.”
Many of these purpose-built rentals are securing financing from private lenders with CMHC backing the loans with mortgage insurance through their MLI Select Program.
Developers and builders are finding that the project economics make much more sense if the project is built as a rental building, but there is one additional line item to contemplate when preparing your budget for these projects – performance and payment bonds.
CMHC requires projects insured under their MLI Select program be bonded, either by the builder, or in some instances, all of the subtrades. Organizing bonding in these instances can be a nuanced process that requires the assistance of a surety focused brokerage.
FCA Insurance has experience and expertise in securing bonding for developers and builders who require bonds for purpose-built rental builds to satisfy the requirements of CMHC as the mortgage insurer.
If you have questions regarding an upcoming project, contact us at [email protected] to speak with a surety expert. Matt Manol is assistant vice-president, surety at FCA Insurance.
