Why first-time condo buyers should weigh price declines against higher interest rates in Canada

Even as falling condo prices may offer new leverage in the GTA and around Greater Vancouver, first-time buyers facing gradual investor exit and rising interest rates should plan for higher total costs. Your monthly payout estimates should include room for condo fees and a mortgage that could cost you more at renewal if the BoC turns hawkish on Oct. 28, as is widely expected. Due diligence on a condo building's finances is another important consideration.

Before you commit to buying a condo, you should compare mortgage offers from several lenders. 

Why investors are stepping back from condo markets across Canada

Reasons for investors reducing condo buying activity varies from declining prices to oversupply across major property markets in Canada. 

Short-term investors were one of the biggest factors behind the mid-2000s condo boom. Many bought pre-construction units, counting on rising prices and strong rents. Then borrowing costs rose, rents softened, and population growth slowed. 

Here are latest stats on the GTA condo price landscape:

• New condo sales have softened. The Greater Toronto and Hamilton Area recorded a 35-year low of 246 new condo sales in the first quarter of 2026. Developers are cutting prices on units they cannot sell.
• Resale numbers are also lacklustre. In September, the average GTA condo sold for $605,257, down 7.7%. The City of Toronto average was $640,248, down 6.1%.
  “For the most part, it's a buyer's market for condos in Midtown and Downtown Toronto,” says Alexander Yolevski, founder and realtor at Yolevski Real Estate. RBC says Toronto condo affordability is the best since 2017, but gains are slowing.
• Suburban condos took a much harder hit. Condo prices in the suburbs plunged 12% to an average of $533,654, pulling the entire region's baseline down with them. 

But don’t picture a flood of forced sales. Rather than selling at a loss, many investors are opting to hold on to their investments and rent their units out at a loss – rentals earnings may not cover total monthly mortgage payments and condo fees. GTA condo rental transactions rose about 10.6% in the first quarter.

Vancouver is a slightly different story. TD Economics notes that Vancouver's condo stock leans more toward people who live in their units. Condo price declines signal weak demand and heavy supply. In September, Greater Vancouver's overall benchmark home price fell 5.5% from a year earlier. Inventory sat 24.3% above its long-term average. TD expects condo prices in Vancouver to fall 7% to 8% in 2026 before steadying in 2027.

But this buyer's market window may be short-lived. Urbanation expects condo completions to drop from almost 30,000 a year in 2024 and 2025 to about 14,600 in 2027 and 13,000 in 2028, potentially slowing any inventory glut.

How higher interest rate risk can impact your condo's total purchase costs

First-time buyers should consider initial mortgage costs along with managing potentially higher monthly payments after first renewal in a rising rate environment. 

The BoC held its rate at 2.25% on Sep. 2 and said inflation risks have increased, linked to higher energy prices and tariffs. Its next decision is Oct. 28 with broader economists' calls converging on a 25 basis-point hike. Higher rates remain a real risk for mortgage borrowers. In some cases, your mortgage rate may move before the Bank does. 

Fixed mortgage rates track the 5-year Government of Canada bond yield, which was about 3.59% on Oct. 21, up from 2.59% a year earlier. This summer, most 5Y fixed rates already sat above 4%. Variable mortgage rates have been below fixed rates through 2026, but they rise right away when the Bank hikes.

A fixed-rate mortgage offers "payment predictability", especially valuable for first-time buyers working with tighter budgets, says Chris Allard, an Ottawa-based mortgage broker.

But lower variable rates are more cost-effective in the short-term and better for cash-flow, he notes. Some borrowers may prefer a variable-rate mortgage with static payments, which he says allows them to maintain monthly payouts based on a rate in the 3% range. Buyers can be protected against cash flow fluctuations while still benefiting from lower variable rates.

"The decision should reflect each buyer's financial flexibility, risk tolerance, and plans for the property," says Allard.

Looking ahead to your renewal should also be on your radar. Most buyers choose a five-year term, so your first renewal would occur in 2031. Mortgage Professionals Canada found that two-thirds of recent first-time buyers feel anxious about renewing at a higher rate. 

"A lower purchase price doesn’t necessarily translate to affordability if borrowing costs stay elevated," Allard cautions. He encourages buyers to focus on what they can comfortably afford today rather than counting on future rate cuts.

To check your housing affordability, you can run a simple test to make sure you could still handle your monthly payments if your borrowing rate climbed 1–2%. 

For example: On a $500,000 mortgage with a 30-year amortization, moving from a 4% interest rate to 5%, adds about $290 a month.

Allard suggests stress-testing your budget against higher renewal rates, potential condo fee increases, and changes in income. "Just because a lender may approve a certain mortgage amount doesn’t mean buyers should stretch their budget to accommodate that limit."

Learn more: How higher interest rates can impact mortgages and spending in Canada

Is a cheaper condo worth buying and really a bargain?

A condo’s price tag is only part of weighing total affordability costs, which includes your mortgage payment, property taxes, condo fees, insurance, utilities, and potential repairs. 

GTA condo fees have been rising about 3% to 5% a year, and Toronto estimates run from under $1 to about $1.20 per sq. ft. a month. Unit owner insurance in Ontario typically costs about $30 to $85 a month.

The next step would be to weigh total ownership costs against current rents. TRREB's first-quarter figures put average GTA one-bedroom rent at $2,246. Some 2026 comparisons lean toward renting based on monthly costs alone in Toronto and Vancouver.

If your numbers point toward buying, you can use current condo market price declines as your leverage. 

Yolevski suggests you start with a unit’s days on market. “Honestly, it tells you more than the price does." In July, GTA condos sold for about 97% of list price after roughly 40 days on average. A condo that has remained for two weeks or more without a price change may leave room to negotiate.

A faster closing, especially on vacant units, can also win deals, Yolevski adds. Sellers want to stop paying a mortgage with no rent coming in. Buyers can often keep protective conditions, such as financing and a Status Certificate review, and still get an offer accepted. A Status Certificate gives insight into a building's finances, legal issues, and rules. New builds follow different rules.

First time condo buyers can avail of a basket of tax breaks:

• Ontario Enhanced New Housing Rebate: Ontario's one-year HST relief became law on May 12. It covers up to $130,000 on new homes up to $1 million, for agreements signed by Mar. 31, 2027.
• First-Time Home Buyers' GST rebate: The federal first-time buyer GST rebate also covers new homes only.
• First-Time Home Buyers' Tax Credit: The First-Time Home Buyers' Tax Credit allows eligible buyers to claim up to $10,000 for a qualifying home purchase on their income tax return, translating to a maximum $1,500 tax rebate. 
• Land Transfer Tax Refund: Resale buyers in Ontario can claim land transfer tax rebates of up to $4,000, plus qualify for an additional municipal rebate in Toronto.
• Municipal Land Transfer Tax Rebate: Toronto's land transfer tax rebate of up to $4,475 applies to new and resale residential properties to first-time buyers. 

Read more: How to claim Canada’s $50,000 federal first-time homebuyer GST rebate

Your due diligence checklist before you buy a condo in Ontario and B.C.

In Ontario, start by asking for the building's Status Certificate. It costs up to $100, and the condo corporation must provide it within 10 days. In B.C., the equivalent is the Form B, due within 7 days. Then check these five things.

• Special assessments. "Special assessments, first and foremost," advises Yolevski, who looks for an upcoming one before anything else. He says owners can face bills of $5,000 to more than $20,000. Ask whether one is planned, or was charged before, and why.
• Reserve fund study. Ontario condo corporations must update this engineering report every three years. Compare the fund balance to what the study says it should hold. Some advisers suggest a fund should have 70% or more capital. The Canadian Institute of Actuaries has warned that many condos, especially those built since 2000, are saving too little.
• Maintenance fee history. Fee hikes are normal, but ask why. Hikes that top up the reserve fund are healthy. Hikes driven by major repairs or poor budgeting are red flags. Unusually low fees can also signal an underfunded reserve.
• Owners versus tenants. Yolevski notes: “There's some correlation between the number of renters in a building and its overall condition, along with things like noise complaints.”
• Insurance. Ask about a building's deductible. Some by-laws allow a corporation to pass part of their building's insurance to owners. Your own unit owner policy should include loss assessment coverage, which helps pay your share of special assessments after covered claims.

In B.C., also read the building's depreciation report. Stratas with five or more lots must now have a current one, with a Jul. 1, 2026 deadline in Metro Vancouver. Stratas must also put at least 10% of their operating budget into a contingency reserve fund.

Read next: How to sell your condo in Canada

Bottom line: Compare mortgage rates before you commit

While you cannot control the Bank of Canada, bond yields, or the condo market, you can control how well you prepare. Work out your full monthly cost of ownership, test it against higher borrowing rates, and read a building's documents before you commit to a purchase. 

Then shop around for best mortgage deals. Rates, terms, and prepayment rules vary by lender, and a small difference can add up over five years.

Frequently Asked Questions (FAQs)

Is now a good time to buy a condo in Toronto?

Whether it is a good time for you to buy a condo in Toronto depends on your budget, your job security, and how long you plan to stay. Prices are lower and sellers are willing to negotiate, so buyers can have real leverage. Plan for rates that could rise.

How much are condo fees in Toronto?

Toronto condo fee estimates range from under $1 to about $1.20 per sq. ft. a month. GTA condo fees have been rising about 3% to 5% a year.

Should I rent or buy a condo in Toronto?

Whether to buy or rent a condo depends on weighing total condo ownership costs including your mortgage payment, property taxes, condo fees, insurance, utilities, and potential repairs against current rents. Some 2026 comparisons lean toward renting based on monthly costs alone in Toronto.

When will the Bank of Canada raise rates?

The BoC’s next decision is Oct. 28 with broader calls for a 25 basis-point hike. The Bank held its rate at 2.25% on Sep. 2 and said inflation risks had increased, linked to higher energy prices and tariffs. 

How much down payment do I need for a condo?

You need at least 5% of the first $500,000 and 10% of the portion from $500,000 to $1.5 million. On a $600,000 condo, that is $35,000. With less than 20% down, you’ll need mortgage default insurance, and first-time buyers can choose a 30-year amortization.

What is a Status Certificate?

In Ontario, a Status Certificate is a package from the condo corporation. It shows the building's budget, reserve fund details, legal issues, and rules. It costs up to $100 and must arrive within 10 days. B.C. buyers get a Form B instead.

How much should a condo reserve fund have?

The amount of a reserve fund a condo must hold varies depending on the building. Compare a condo’s reserve fund balance to it’s target in the latest documents. Some advisers suggest a fund should have 70% or more capital. A big gap raises the odds of condo fee hikes or special assessments – which typically get passed down to unit owners.