The new condo market in Vancouver, and Canada more broadly, is struggling as developers encounter challenging conditions in the form of higher costs and reduced demand.
The condo market in major Canadian markets, including Vancouver, is freezing over due to the current interest-rate environment and increasing costs to build a project, according to a Nov. 7 Emerging Trends in Real Estate 2025 report from PricewaterhouseCoopers LLP (PwC) and Urban Land Institute (ULI).
“In markets like Toronto and Vancouver, a significant market slowdown is underway as it becomes too costly for many developers to proceed with condo developments,” said the report. “Developers are also facing challenges on the revenue side as investors, who make up a large portion of new condo buyers in many markets, pull back.”
While the issue may be more acute in Toronto, the report said pre-sale activity in Vancouver is also depressed, as investors may lose money on renting out units and unsold inventory accumulates. Some buyers may also have trouble closing on purchases of new condos.
“All these factors together have brought the condo market to a grinding halt compared to what it was a few years ago,” said the report.
“While the issues are most acute in Toronto and Vancouver, interviewees expressed a broad sense that condo activity is seeing a significant slowdown across the country. Developers might proceed with projects that have already begun construction, with those in locations with good transit access more likely to continue. But many are holding back on launching new builds.”
PwC and ULI expect these market conditions to persist into 2025, with developers already pricing in future rate cuts by the Bank of Canada. Meanwhile, potential buyers are adopting a wait-and-see posture as they anticipate further price corrections and lower interest rates.
The report noted that whereas investors previously expected price appreciation during construction, alternative assets now offer more compelling returns. The report also observed a widening price gap between existing condos and pre-construction units, further weakening pre-sale activity.
On the supply side, lenders are becoming increasingly cautious in bankrolling condo projects.
“Reports of increasing numbers of pre-construction buyers pursuing assignment sales suggest condo builders are struggling to close sales on newly completed projects,” the report said.
“The market downturn is contributing to developers holding a significant inventory of unsold units and incurring carrying costs and debt financing expenses, making it unfeasible to launch new projects.”
PwC and ULI said the net result has been a bifurcation of the industry. On one hand, there are well-capitalized developers with strong balance sheets and sizable land banks. On the other hand, small- and mid-sized developers may not have the reserves to navigate growing pressures. The latter can consider pivoting to purpose-built rentals or negotiating financial arrangements allowing them to retain land holdings.
The report cited the possibility of more real estate receiverships in 2025. On the bright side, the authors said pent-up demand could lead to an eventual market recovery, with a new focus on end users rather than leveraged investors.
