This past year has been nothing short of challenging, especially for the condo pre-construction market. Many investors and buyers have felt the strain as market conditions shifted dramatically. In times like these, the saying “Know yourself and your opponent, and you’ll never lose a battle” becomes all the more relevant. To understand where the market is heading, we must look into what developers are doing, thinking, and facing today.
From Frenzy to Freeze: A Rapid Market Shift
Just five years ago, a pre-construction condo launch could sell out within days—hundreds of units gone in a weekend. But those days are long gone. Since the market peaked post-pandemic in 2021, pre-construction sales have plummeted to record lows, levels not seen in decades.
A major factor behind this downturn has been rising interest rates. As borrowing costs surged, both buyers and developers felt the squeeze. New projects now struggle to meet the sales targets required to secure construction financing. Banks often require developers to pre-sell 70% of a building before releasing construction loans. If a developer launches a 500-unit project, they typically need to sell at least 350 units. Falling short, say with only 50 sold, renders them ineligible for loans—causing delays or outright project cancellations.
The Domino Effect of Financial Overleveraging
The situation mirrors what we saw in Asia, particularly in China, where developers were heavily overleveraged—borrowing far beyond sustainable levels. In Canada, while not as extreme, similar risks have emerged. Some developers bit off more than they could chew, initiating ambitious projects with shaky financials, only to be hit hard by cost escalations in materials, labor, and new government fees.
This has led to several high-profile cancellations, even from well-known developers. For instance, the One Bloor West project by Mizrahi Developments went into receivership after struggling with rising costs, inconsistent pricing, and a structurally complex build. Other cases include large multi-tower developments in Vaughan, like Liberty and Gopa, that were canceled after facing rising construction costs and land complications.
The Developer Landscape: Three Main Types
Understanding a developer’s background can be a powerful tool for buyers. Generally, developers fall into three categories:
1. Family-Owned Developers
These are often long-established companies with decades of experience, such as Tridel, Daniels, Greenpark, and Mankes. They prioritize long-term brand reputation and quality control. Developers like Tridel and Daniels focus on delivering consistent build quality and exceptional customer service. Their conservative approach to budgeting and strong internal standards provide buyers with a greater sense of security.
Mankes, often dubbed the “Hermès of developers,” is a multigenerational family firm known for their attention to design and detail. Their condos—such as those in Downtown Toronto and North York—often include luxury finishes and advanced features like automated parking systems and premium sound-insulated materials.
2. Institutional or Fund-Based Developers
Examples include CentreCourt and Mattamy Homes. These firms operate more like financial machines, backed by private equity, pension funds, or venture capital. Their goal is to hit performance benchmarks for their investors. This model can lead to aggressive pricing strategies. When the market is hot, they may push for high margins. When the market cools, they often offer steep discounts to meet investor timelines.
CentreCourt, in particular, is known for its speed, efficiency, and military-like execution. They are agile in adjusting to market conditions and have a proven track record of completing projects quickly—even offering incentives to construction crews to finish ahead of schedule.
3. Hybrid Developers (Family-Style with Institutional Partnerships)
Some firms straddle both worlds. They may have family roots but collaborate with institutional landowners or investors to share risk and scale faster. This allows them to take on more projects while maintaining quality. Developers like Aspen Ridge and CountryWide fall into this category. Many projects in Markham and Vaughan—including well-known communities like Bayview Hill and Richvale—were built by these reputable firms.
Developer Due Diligence: What Buyers Should Know
When considering a pre-construction purchase, it’s not just about location or floor plans. It’s critical to research the developer:
- Track Record: How many successful projects have they completed?
- Business Model: Are they family-run, institutional, or a hybrid?
- Financial Stability: Have they canceled projects in the past?
- Customer Service: Are they known for supporting buyers post-closing?
- Vision: Do they invest in sustainability, energy-efficient design, and community enhancement?
Buyers should also consider the project’s performance (or “pro forma”)—a developer’s internal spreadsheet that forecasts costs, revenue, and profit. But even the most meticulous pro forma can be thrown off by fluctuating materials costs, labor shortages, or sudden changes in government policy.
Final Thoughts: Buy with Eyes Wide Open
In a tough market, developers must constantly adapt—whether it’s partnering with landowners, increasing density to balance budgets, or offering deeper incentives to attract buyers. The most resilient developers are those who plan conservatively, prioritize quality, and stay transparent with buyers and stakeholders.
For investors and homebuyers, understanding how developers operate is key to making smarter decisions. It’s not just about buying a unit; it’s about choosing the people and the business model behind it.
In real estate, the builder matters. Know who they are, how they operate, and what they stand for. That knowledge can make all the difference in a successful investment.