Homebuyers who took the risk of purchasing a property before its construction completion to secure a position in a costly market are now facing the repercussions of declining property values. In Canada, particularly in condo markets like Toronto, an increasing number of individuals are realizing the harsh reality that developers and lenders are not willing to bear the financial loss when property values decrease.
One such individual, Vitor Almeida, a carpenter with real estate experience, entered into an agreement over five years ago to buy a pre-construction condo in Vaughan, Ont., for $675,000. Despite putting down around 20%, he encountered challenges with securing financing as an appraisal later valued the property at $590,000. This discrepancy made it difficult for Almeida to obtain a mortgage to finalize the purchase.
As property values in the Greater Toronto Area, particularly in the condominium segment, dropped over five percent by late 2025 compared to the previous year, many buyers like Almeida find themselves in a predicament where they need to cover the difference between the appraised value and the initially agreed-upon price.
With limited options available, buyers facing these situations may find it challenging to mitigate the financial impact. Mortgage broker Ron Butler emphasized that developers could pursue legal action against buyers who fail to fulfill the agreed-upon purchase price due to market fluctuations.
As the Toronto condo market continues to see a decline in prices, attempting to transfer the property to another buyer through a process called “assignment” is not always a straightforward solution. Real estate lawyer Gathya Manoharan highlighted the complexities involved in assigning pre-construction purchases and the additional costs that may arise, such as fees imposed by builders for approving assignments.
Amidst a market characterized by high supply and low demand, buyers are grappling with the repercussions of decisions made during a hotter market period now manifesting in a colder market environment. Experts caution that regulatory interventions may not provide a simple fix to the challenges faced by buyers in the pre-construction market, emphasizing the need for buyers to be aware of the risks associated with committing to fixed prices in volatile market conditions.
