The collapse—and return—of Toronto’s condo investor

A Montréal investment firm is betting big on Toronto’s lagging condo market. On May 12, developer and investment firm Jesta Group announced plans to spend half a billion dollars on more than one thousand Toronto condos. The move comes after months of steady decline in the sector. Since January sales in the city have hit a 35-year low, the market has been sitting on record levels of unsold inventory, there have been zero new projects launched, and prices across the GTHA have undergone a sustained period of deflation.

After almost six months of retreat, Jesta believes the condo market has hit bottom and is poised for a rebound. In the words of Anthony O’Brien, a senior director at the firm: “the current market environment has created a unique window to deploy capital at scale.”

Jesta, which manages a large portfolio of residential, office, and hospitality assets, is effectively buying distressed inventory during the contractionary phase of a speculative bubble. It is a scaled down version of the buying spree embarked on by institutional investors like Blackstone when the bottom fell out of the American housing market in 2008. This is yet another case of big money buying from overleveraged retail.

The gamble is that today’s oversupply will become tomorrow’s shortage. Given that just a few months of stalling prices have brought condo construction to a screeching halt—and all but ensured that virtually no new units will come online three years from now—it is a reasonable bet.

If Jesta’s wager pays off it will validate projections made by economic researchers at RBC who, in the fall of 2025, predicted surplus inventory could start to be sold off this year, a process that “would likely be gradual initially, accelerating later in 2026 as resales gain momentum. Such conditions would set the stage for renewed pre-construction demand in the second half of 2026 with more robust activity in 2027.”

Economists are normally averse to prognostication, but in this case, it’s a no-brainer. Cyclical volatility is a known function of financialized housing systems like ours.

The boom and bust of Toronto’s condo market over the last decade was explored in a report published by the Bank of Canada in February. This background is essential to understanding the retrenchment we’re seeing now.

A core insight of the report is that throughout the second half of the 2010s condo developers were heavily dependent on short-term investors buying presale units to earn a quick profit.

It worked like this: banks required roughly 70 percent of units to be presold before construction loans were issued. Buyers of those presale units noticed that completed condos sold for much higher prices than their presale costs, regularly by margins of 40 percent. This created an opportunity for cash-rich investors to buy presale condos and make enormous profits when those units actually came to market.

To give an example, let’s say an investor bought a presale condo worth $1 million in 2016 and paid the minimum deposit of $200,000. When construction wrapped up three years later, the value of that condo would have increased by 40 percent to $1.4 million. The investor could then sell the unit at this new price and earn a tidy profit of $400,000—double their initial investment.

The promise of 100 percent profit every few years was an unbelievable deal, and developers found themselves awash in investment capital.

This system worked as long the economy was steady, interest rates stayed low, and people could (with discomfort) absorb rising housing costs.

Presale investors were often selling completed units to other investors—generally mom-and-pop landlords—looking to secure income generating properties. The people who actually lived in these condos were effectively two steps removed from the people building them. For developers, the primary customer shifted from those who would live in their condos to investors who used them to extract wealth. This created an incentive to construct buildings with a larger number of smaller units that had lower deposit requirements. Small investor speculation began distorting not just pricing, but unit design as well.

Developers started building micro units smaller than 500 square feet. At their peak, these tiny suites accounted for 60 percent of new condo units coming onto the market. They were being built with little consideration for the people who might ultimately have to live in them. According to the Bank of Canada, only 30 percent of new households “have the characteristics typically associated with buyers of micro units”—an oddly clinical phrase that skates over the more important question of how many households would actually prefer to live in such a confined space.

Ultimately, developers’ reliance on investors disfigured Toronto’s condo market. In 2024 a wave of undesirable products became available just as interest rates rose and the labour market began to soften. End-users were unable to pay the rental fees necessary to sustain landlords’ suddenly more expensive mortgages. Presale purchasers stopped seeing the price appreciation they’d become accustomed to as landlords stopped buying. Price-upon-unit-completion began to fall below presale purchase amounts, putting many investors underwater.

The era of 100 percent returns came to an end in the mid-2020s. A $1,000,000 presale made in 2022 with a $200,000 deposit could, three years later, be worth as little as $700,000. In these cases, the investor still owed the builder $1,000,000, representing losses of $300,000.

The business case fell apart. Condo presales collapsed, financing became nearly impossible for developers, and major projects were delayed or cancelled. Month after month Toronto’s condos languished on Zillow and Redfin. New construction came to a halt.

Unlike many of our OECD peers, Canada’s housing markets have been subjected to a dynamic where building happens primarily when markets are booming, and markets boom when prices are set to rise—meaning that housing pain is a prerequisite for housing construction.

But the period of stagnation in Toronto’s condo market may be coming to an end. Jesta’s promise to purchase half a billion dollars of surplus stock marks a return of the investor. Only this time it isn’t mom-and-pop looking to make a buck, it is billion-dollar firms moving our housing system ever closer to broad consolidation under financial interests.

Institutional acquisition of condos may, as the economists at RBC predicted, prompt the return of presale investors and stabilize developers by the end of the year. Will the return of investors lead to another round of price inflation? If historical patterns are any indication, quite possibly.

But regardless of the timing and intensity of the next inflationary cycle, the effects of yet another corner of our housing system being taken over by institutional investors will be to worsen long-term affordability. Financialized housing systems put upward pressure on prices and limit pathways to homeownership. They create perverse incentives to build only when there is a promise of price inflation, never deflation. To build for investors, not people—and to maintain artificial scarcity and promote bubbles.

Canada’s housing is being handed over to capital markets that treat our homes as though they serve no other purpose than to generate dividends for asset holders. Those markets seek to maximize profits by ensuring the housing system remains a perpetual pain point for renters and aspiring homeowners. Market incentives are such that there will never be enough stock built to create sustained downward pressure on home prices. New technologies will be used not to create more and better housing, but to maximize shareholder returns by ensuring the rent is always the highest one can possibly afford.

It doesn’t have to be this way. We can pull our homes back from the claws of predaceous investors. We can build a non-market housing sector that anchors prices and provides affordable, dignified homes to all. And we can actively de-commodify the places we live.

Laurence Braun-Woodbury is a writer and community advocate who has worked with NGOs across the country to help adults experiencing poverty and homelessness. His first novel, Glamorous Failures, was published in 2023. His next book on housing financialization will be published by Between the Lines.