Homeowners hoping to upsize are suddenly seeing lower demand – and falling prices – as they try to sell their current property
Toronto’s ongoing condo crisis is burning investors whose rental properties have turned into cashflow-negative nightmares, while lower prices and less competition have also opened some doors for first-time homebuyers.
But the market slump is also causing headaches for a specific type of homebuyer in the city: condo owners who want to upscale but are facing huge challenges selling their existing property at asking price.
Compared with the same time last year, average condo prices in the city centre were down 3.4% in April – and the 905 area surrounding Toronto registered a 4.8% decline, according to the Toronto Regional Real Estate Board (TRREB).
In the city centre 416, that meant average condo prices slipped by $24,950 during the past 12 months, while 905 condo sellers could expect to make a hefty $31,444 less in April 2025 than if they had unloaded their property a year earlier.
That means condo owners hoping to make the move to a bigger property are often able to count on less money than they had envisaged from a sale to go towards the downpayment on their new home, according to Toronto-based mortgage agent Christelle Mwamba (pictured top) of Mortgage Scout.
“People that own condos and want to upgrade or upscale because of space are looking to buy,” Mwamba told Canadian Mortgage Professional. “The only discouraging thing is that in the condo market right now, when they’re selling, the values have gone down.
“And most people usually use that equity to upgrade – to buy a townhouse or a detached [home]. So the equity that they were estimating for the downpayment price has actually reduced.”
If they were in a position to do so, those buyer types might also have opted to hold on to their condo in years gone by and rented it out with a view to building their real estate portfolio. But that’s barely an option in the current market, where low rental demand for those property types and plunging rents have put the squeeze on landlords.
“I’m seeing a lot of people not even exploring that because of the rental market and because there’s so much supply in the condos too,” Mwamba said. “A lot of these things are staying in the market for longer.”
Canada's housing market continued its cooling trend in April, with prices falling across 68% of monitored cities. The Teranet–National Bank House Price Index shows a 2.4% decline since December 2024, with Ontario heavily impacted.https://t.co/lsdQQZLKbK
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 21, 2025
Some buyers prefer not to move – but might have little choice
The truth remains, though, that while some buyers are in a position to hold off on moving to a new home, others don’t have that option – whether because of a growing family or the need to relocate for work.
A significant amount of Toronto’s condo towers are home to notoriously tiny units, often smaller than 500 square feet, which are ill-suited to couples with children or even households with more than a single member.
“For the people who are buying in this current market, it’s not a luxury – it’s a necessity,” Mwamba said. “They really want to move up. There’s not a lot of space in condos. That’s the biggest thing, the square footage in the condo right now [is small].”
Last year’s mortgage rule changes arrived at a good time for buyers
Plenty of those move-up buyers who find themselves in the lurch with a smaller amount to put towards a new home purchase because of falling sales prices, Mwamba said, are turning to a mortgage rule change from last year to help get their deal over the line.
Previously, the maximum home price that qualified for an insured mortgage – one with a downpayment of less than 20% – was $1 million. But the government said it was upping that limit last year, meaning national housing agency Canada and Mortgage Housing Corporation (CMHC) can now insure mortgages for purchases of up to $1.5 million.
That means even when buyers can take less equity from their home sale than they’d expected, they can often tip their downpayment below 20% on a seven-figure purchase in order to still qualify.
“That’s the advantage of that new CMHC rule,” Mwamba said. “A lot of people are losing that equity – so they have to readjust their downpayment because the equity that they could have had to buy that new property is being reduced.”
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