The Rate Hike Everyone Watched and the Toronto Condo Deals Nobody Talks About

The Rate Hike Everyone Watched and the Toronto Condo Deals Nobody Talks About

The Bank of Canada raised its policy rate today by 0.25 percentage points, from 2.25% to 2.50%, its first hike since July 2023. With September inflation at 3.1%, the Bank is worried that price pressures could last longer than expected. It now forecasts inflation of about 3.5% by year-end, around 3% through 2027, and a return to its 2% target only by mid-2028. Most people will focus on what this means for mortgage rates and home prices, and higher borrowing costs are rarely good news for a market already struggling with affordability. But there is another story unfolding in Toronto's condo market that deserves just as much attention.

First, the policy rate doesn't affect all mortgages equally. Variable-rate mortgages move more directly with it, while fixed rates are driven largely by bond yields, which have already been reacting to inflation expectations, global uncertainty and the U.S. bond market. Many buyers were facing higher financing costs well before today's announcement, so anyone planning a purchase should watch where fixed rates are heading, not just the Bank's next decision.

Meanwhile, the condo market is sending its own signals. According to Urbanation, new condo sales across the Greater Toronto and Hamilton Area reached 760 units in the third quarter of 2026, roughly double the year before. That sounds encouraging until you look closer: 339 of those units, about 45%, were bulk purchases by institutional investors, who paid an average of $763 per square foot, roughly 40% below the original prices in the same buildings. Near Yonge and Eglinton, for example, an investment fund bought 43 unsold units at the Line 5 development for about $22.3 million and plans to hold them as rentals. Developers are sitting on thousands of completed condos they can't sell at original prices, and some are choosing to sell them in bulk at steep discounts rather than wait for individual buyers. A single buyer won't get the price a fund pays for 43 units, but these deals show how wide the gap between seller expectations and buyer willingness has become.

I'm seeing this firsthand in my own recent sales across the GTA. A tenanted downtown condo near the University of Toronto was less appealing to buyers who wanted to move in, so it sold to an investor below what comparable vacant units might fetch. Yet based on the investor's projections, it offered an ROI of about 9%, a reminder that a lower price doesn't mean a bad investment when rental income, financing and the long-term outlook make sense. In Mississauga, a move-in-ready two-bedroom sold for more than some comparable units on higher floors, which usually command a premium, but still below a similar unit that sold in May. Condition and presentation still matter, but even a well-kept property can't fully escape the downward pressure on prices.

Other listings are struggling. A condo I have in Richmond Hill has drawn very few showings, and one in Scarborough, priced above what buyers seem willing to consider, has had virtually none. In a slower market, pricing doesn't just determine the best offer; it determines whether buyers come to see the property at all. When the market was hot, sellers could start high and wait for buyers to catch up. Today buyers can compare units in the same building, check recent sales and spot listings that have sat for months. If a condo is priced noticeably above comparables, they simply move on, and with no one at the table there is nothing to negotiate. That's why I advise sellers to look past the highest historical sale in their building, since a price from May, or even three months ago, may no longer reflect today's market.

Rental competition is growing too. Developers and institutional investors are shifting toward purpose-built rentals, such as a new Leslieville project planned with more than 250 rental homes, including affordable units. That makes sense for developers when individual buyers can't pay prices that justify new construction, but it raises questions for small investors. If rental supply keeps growing while ownership costs stay high, rents may not rise enough to cover mortgage payments, maintenance fees and property taxes. A condo may look attractive because its price has fallen, but the numbers still have to work.

For buyers who plan to live in the property, the picture is different. Compared with a few years ago, they have more choice, more time and far more negotiating power, especially with sellers carrying vacant units or under financial pressure. Still, a property isn't a good buy just because it's cheaper than in 2022. The real questions are whether the price is reasonable against recent sales, whether the building is financially sound, whether the carrying costs are manageable and whether the home fits your long-term plans. For sellers, the advice is equally practical: price for today's market, not yesterday's. Condition, presentation, location, layout, floor level and whether a unit is vacant or tenanted all shape its appeal, and as my recent sales show, there is no single pricing strategy that works for every condo.

Looking ahead, I don't think today's rate hike alone will decide where Toronto prices go. Employment, incomes, inventory, rental demand and consumer confidence all matter. The condo market is still working through a significant supply-demand imbalance, with institutional investors finding opportunities at prices that would have been hard to imagine a few years ago while individual buyers stay cautious. That could eventually help establish a bottom, but there isn't enough evidence yet to say the market has turned. What I can say is that properties still sell when price and buyer expectations align, and those expectations have changed. Sellers need to be realistic, buyers should look carefully for value rather than rush, and investors should focus on actual returns instead of assuming values will automatically recover. Today's rate announcement may dominate the headlines, but the transactions happening across the GTA tell us much more. In this condo market, the asking price may get a property listed, but it's the actual market value that gets it sold.



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