01/27/2026
So what’s really going on with new construction in Canada — and in Toronto specifically?
Here’s the reality.
Canadian developers are sitting on a record number of completed but unsold new homes. According to CMHC, in December the number of finished and unsold units hit an all-time high — a rare situation for a country where, until recently, most homes were sold at the pre-construction stage.
Even more telling is the fact that half of all vacant new homes are located in Toronto and Vancouver — markets where prices have remained stubbornly high despite weak demand. That balance, however, may not last long. The growing stock of unsold homes is now adding to a long list of downward pressures on prices.
In December, completed and unsold new-home inventory rose 3.3% to 18,998 units, up 35.5% year over year. This is a new historical record, surpassing the previous peak from January 1991 (18,091 units).
This situation is highly unusual for Canada. Traditionally, most projects were largely sold before construction was completed — developers typically needed to sell about 70% of units just to break ground. Building “on spec” and carrying finished inventory with their own capital has never been the norm.
Today’s level of unsold inventory is 52% above the 35-year average, signaling a serious structural shift. Nearly half of this inventory (49.7%) is concentrated in Toronto and Vancouver — cities long known for tight supply.
In the Greater Toronto Area (GTA) alone, 20.9% of all completed and unsold new homes in Canada are now located. In December, inventory rose 4.5% to 3,975 units, up 56.8% from a year earlier.
This is the highest level since April 2016 and only the fourth comparable episode in history — previously seen during the early-1990s housing crash and the 2014 oil downturn.
The picture becomes even more concerning when you consider that roughly 75% of Toronto pre-construction units were purchased by investors. Completed and unsold inventory now sits 35% above historical norms, suggesting that end-users were unable to absorb roughly one out of every four units.
Against the backdrop of the weakest sales on record, this represents a serious challenge to price stability at current levels.
What about the vacancy tax?
New-home prices remain, so to speak, “sticky” and have been slow to decline despite weak demand. But time is working against them.
Vacancy taxes were designed to increase supply by reducing the profitability of holding empty homes. However, governments have quietly introduced exemptions for new construction, and the rules vary:
Federal level and Vancouver: effectively indefinite exemptions, as long as the unit is listed for sale
(even if priced unrealistically high to avoid an actual sale);
Toronto: the exemption lasts only two years, and for many projects that clock is already ticking.
Bottom line: pressure on the market continues to build, while meaningful support from federal or provincial governments remains limited.
Even with tax exemptions in place, the market is facing multiple headwinds at once:
record-low sales,
rapidly rising inventory,
a large pipeline of construction already underway.
At the same time, it’s unclear where a new growth catalyst could come from in the near term to offset these forces.
That’s the analysis.
And if you, my friends, find yourselves in a similarly “interesting” situation — reach out to me. I’ll help.
