What to know
- Toronto’s condo market has been facing a downturn, but larger units have proven more resilient than studios and one-bedroom apartments.
- According to Wahi, one-bedroom condo prices have fallen 14 per cent since 2020, reaching a median of $480,000 in 2026.
- In contrast, three-bedroom condo prices have increased 13 per cent to $700,000, while units with four or more bedrooms have gained 15 per cent to $715,000.
- An oversupply of smaller condos, declining demand and increasingly undesirable layouts are contributing to the gap.
- Wahi economist Ryan McLaughlin says developers may need to diversify the types of units they build to better reflect what buyers want.
With Toronto’s condo market facing a downturn in the past year, some units have been seeing steep price dips. In the meantime, larger units are holding up their value significantly, with some even recording double-digit post-pandemic increases.
Toronto’s recently slow real-estate market has made multiple headlines over the past year, with sales and prices having declined significantly after reaching their peak in 2022. The slow patch has become a reality especially for smaller condo units, which have been plummeting on sales even faster than the overall market.
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But a recent analysis by real-estate platform Wahi has found that not all units are losing in value and demand.
Wahi’s study that compares median condo prices in 2020 with those of 2026 found there’s a significant gap in value between larger and smaller units.
According to the report, median prices for one-bedroom condos fell about 14 per cent since 2020, reaching $480,000 in 2026. The price drop reflects an even wilder plummet in demand, with the report revealing that sales for one-bedroom condos have declined by 39 per cent in the same period.
In contrast, large units’ value seems to have increased. Prices for two-bedroom condo units registered a modest increase of two per cent, reaching a median price of $630,000 in 2026.
Larger units saw even larger increases. Three-bedroom condos’ prices went up by 13 per cent in the same period, reaching a median price of $700,000.
Those with four bedrooms or more had the strongest appreciation of any unit types, with prices having increased by 15 per cent to $715,000.
What is driving the gap in value?
Wahi Economist Ryan McLaughlin tells Now Toronto that the value gap between small and large condo units could be explained by a combination of two sides of the market: supply and demand.
On the supply side, cities like Toronto and Vancouver have had an unprecedented boom in small unit construction, including studios and one-bedroom apartments, just after the pandemic.
As a result, with many of these developments now completed, these cities have an abundance of small units’ inventory. On the other hand, these cities have not seen the same growth in construction of larger units.
“For single family homes, we’re getting almost no new supply versus for condos we had quite a lot of supply and some of that is still hitting the market,” McLaughlin explained.
Although there is an abundance of these smaller units, demand for them has plummeted over the last few years.
With the federal government promoting policies to slow down immigration, developers and investors that own these small condos are finding themselves having difficulty to rent or sell out these units.
“Single-family homes tend to be purchased and lived in by people that have lived in Canada for a longer time, and are more established [and] a little bit older versus immigration,” he said.
“We had this sort of unprecedented immigration boom, which happened in 2022 [to] 2024. These folks tend to first rent in condos and in apartments, and then if they buy, they’re more likely to buy these smaller units. So, rents are falling because immigration has been turned off.”
With cheaper rents and a significant drop in demand, investors and developers are being forced to put prices down, and even then, many are unable to sell.
Small units often come with undesirable designs
In addition to an imbalance in supply and demand, McLaughlin explains that smaller condo units are often accompanied by strange or undesirable layouts that prompt buyers to take a step back.
With the real-estate boom and demand for smaller units reaching its peak after the pandemic, developers prioritized building more units, even if that meant compromising on space and liveability. The result was a series of units with strange designs, from extremely narrow kitchens to weird shapes where residents can’t properly fit their furniture.
“There’s sort of a consensus that the market probably overbuilt studios and one-bedrooms that some people say are sort of unlivable. They have difficult shapes sometimes, your bed is in your kitchen, and people are living in 400 square feet, [it’s] just awkward,” he said.
“The market demanded those simply because they were actually able to get a higher price per square foot in these smaller units.”
But now that demand for these kinds of units has significantly declined, developers can’t find a way to sell them out, and buyers can’t see themselves investing in strange or unlivable spaces.
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First-time buyers willing to spend more for better spaces
Back in 2022, when the market was at its peak and when investors were quick to buy them for fear of missing out, many first-time homebuyers would choose to buy these smaller units as a way of getting their foot in the door and building equity towards their forever home.
But now, according to McLaughlin, many are willing to wait out and save more towards a home where they can grow and live longer, which leads to an even deeper drop in demand.
“That was probably one of the reasons why they were popular. Even if they’re higher price per square foot, they were still lower price overall because they’re smaller, and so it was a cheaper way to get into the market,” the economist said.
“Especially now that the downsides of these units have become more apparent, and they’re just not very popular, and they’re having a hard time selling them, and it’s certainly difficult to start a family in a unit that’s 400 square feet.”
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On the other hand, the steep downfall in demand means that these units are now even cheaper, although for many buyers, they are no longer worth the investment.
“Every time you buy a unit, realtors are paid, lawyers are paid, there’s taxes, there’s all these transaction costs that are substantial. You want to be able to grow into the unit that you’ve purchased, and with a studio, it’s basically like there’s no growth that’s possible,” McLaughlin added.
Value gap could be a wake up call for developers
With developers and investors now facing a condo inventory they can’t seem to rent or sell out, McLaughlin said this could signal to developers that they must diversify the types of units they choose to build.
However, that could take a while, as the expert says developers seem to be taking a step back at this time, with the overall market downturn.
“They’re just not building. They’re not starting anything. So, they’re not starting these small units, [and] they’re also not starting bigger units. Starts are just at zero, basically,” he said.
“I would suspect that in our next building boom, whenever that happens, even if it’s 10 years from now, I would hope that we would diversify our units a little bit more.”
