Many people who bought pre-construction condos in the GTA near the 2022 peak are now reaching closing with values roughly 20% lower. Banks lend based on what a condo is worth today, not what you paid, so some buyers have to come up with $100,000 or more at closing. That stress is making builders and some sellers more willing to negotiate, which is creating real opportunities for long-term buyers.
How pre-construction is supposed to work
Here's the basic idea. Let's say in 2022 you agreed to buy a condo for $900,000. You don't get a mortgage yet. Instead, you put down deposits over a couple of years, let's say $135,000.
The assumption is that by the time the building is finished, the market will have gone up. The $900,000 condo you bought is now worth $1,000,000. You locked in early, you've put down $135,000, you only need a $765,000 mortgage, and you've created equity before you even move in. You're in the green, and everything is good.
- Purchase price, signed in 2022$900,000
- Deposits paid during construction (15%)− $135,000
- Mortgage needed at closing$765,000
- Expected value when the building is finished$1,000,000
- Equity before you even move in+ $235,000
What actually happened to Toronto condo prices
But Toronto didn't do that. Condo prices peaked in 2022. According to TRREB, the average GTA condo apartment sold for about $790,000 in the first quarter of 2022, and about $810,000 in the City of Toronto. By July 2026, the GTA average was about $636,000.
Averages hide a lot of variation between buildings and unit types, but the direction is clear. Many units bought on paper at peak prices are now worth noticeably less than their contract price.
The appraisal gap: why some buyers are getting squeezed
So imagine this. You bought that condo for $900,000 in 2022. You've put down $135,000 over the last few years, and you still owe the builder $765,000. Then the bank appraises your condo at $750,000, sometimes less.
Banks don't care what you bought it for. They lend based on what it's worth today. With a conventional mortgage, a lender will typically finance up to 80% of the appraised value, and the builder still expects the full contract price.
What you still owe the builder
- Purchase price$900,000
- Deposits already paid− $135,000
- Due on closing$765,000
What the bank will lend
- Appraised value today$750,000
- Lender maximum (80%)$600,000
- Shortfall you cover in cash$165,000
Illustrative example. Actual lending limits depend on the lender, the buyer's finances, and the type of mortgage. Closing costs, such as land transfer tax, development charges and HST adjustments, come on top of this.
Sometimes that gap is small, and it works. You just have to come up with a little extra cash. Sometimes it isn't small, and people are having to find $100,000 to $150,000 or more on closing. Some are able to do that. Some are not. This is where buyers are getting squeezed.
Why stress creates flexibility
Here's the part that's unfortunate, but also interesting. When a market resets like this, it creates stress, and stress creates flexibility.
That's where we're finding opportunity in the condo market for buyers today. It's not about taking advantage of anyone. A motivated seller and a prepared buyer can both come out of a deal better off.
What this means if you're thinking about buying
If you're thinking long term, five, ten, or fifteen years, this is a shift worth paying attention to. Just go in prepared:
- Get pre-approved firstKnow exactly what you can borrow, so you can move when the right opportunity shows up.
- Compare against recent sales, not asking pricesLook at what similar units in the same building and area have actually sold for.
- Understand the full cost of a new or assigned unitAsk about development charges, HST adjustments, occupancy fees, and any builder approval fees on an assignment.
- Have a lawyer review the contractBefore you sign, not after. Pre-construction and assignment contracts are long and full of builder-friendly clauses.
If you're the one with a closing coming up
If you're facing a gap yourself, start early. Talk to a mortgage broker about your options, get a realistic sense of what your unit will appraise for, speak to a real estate lawyer about your contract, and talk to the builder sooner rather than later. Depending on your situation, options can include bringing in more cash or a co-signer, negotiating with the builder, or an assignment sale. The worst position to be in is finding out a week before closing.
Common questions
What is the appraisal gap on a pre-construction condo?
It's the difference between what you agreed to pay the builder and what a lender will finance at closing. Lenders base the mortgage on the condo's appraised value today, not your original purchase price. If the unit appraises for less than you paid, you have to cover the difference in cash.
Why are Toronto pre-construction buyers short on closing?
Many bought near the 2022 peak, when the average GTA condo apartment sold for about $790,000. By July 2026 the average was about $636,000. Units bought at peak prices are appraising lower, so buyers can't borrow enough to close without adding more cash.
Is now a good time to buy a condo in Toronto?
It depends on your situation, but for long-term buyers (five, ten, fifteen years) there is more room to negotiate than there has been in years. Builders are offering incentives and some over-leveraged owners need to sell, which can create opportunities. Get pre-approved, compare against recent sales, and have a lawyer review any contract before you sign.
Curious what this means for you?
If this sparked your curiosity, or it's something you want to know more about, reach out. We can look into it together. And remember: don't sign anything you shouldn't sign, and be safe out there.
— Ewan
Get in touchSources: TRREB Condo Market Report, Q1 2022; TRREB July 2026 data via Canadian Mortgage Professional; CP24, April 2026. This article is general information, not financial or legal advice.