Canada’s Real Estate Reckoning: What the Downturn Means for Investors—And Why Multifamily Still Makes Sense

Canada’s residential real estate development industry is experiencing its sharpest contraction in decades. Across the country, homebuilders, marketing firms, architecture studios, and sales brokerages are downsizing, closing, or going into hibernation. As dire as the headlines may seem, seasoned real estate investors understand that markets operate in cycles. While the pain is real, so is the opportunity. For those with capital and long-term vision, this moment may represent one of the best entry points into the multifamily sector in years.

In a recent article by The Globe and Mail, journalist Rachelle Younglai chronicled the depth of the downturn, noting that some of the most recognizable names in Canadian real estate—Mattamy Homes, Great Gulf, Polygon Realty, and Wesgroup Properties—have all been forced to cut staff. Firms that support the development ecosystem, like marketing agency LA Inc. and rendering company Norm Li, have shuttered or dramatically downsized. Preconstruction sales brokerages, such as Rennie and MLA Canada, have also been hit hard. The numbers are alarming: preconstruction condo sales have dropped between 50 to 80 percent across major urban centers, hitting levels not seen since the mid-1990s. In Toronto, Q1 2025 sales were lower than any period in the last 30 years. In other Ontario cities like Hamilton and Kitchener-Waterloo, as well as in markets like Edmonton and Montreal, the trend is the same.

This sharp decline is not simply the result of one or two market forces. It’s a convergence of several including elevated construction and development costs, rising municipal fees, and stubbornly high interest rates. Investors, once the backbone of Canada’s preconstruction condo market, have pulled back dramatically. Many now face negative cash flow as rents no longer cover their carrying costs, while condo prices remain flat or declining. Compounding the issue, the federal government has capped international student permits and slowed immigration—policies that have tempered near-term housing demand, especially in rental-heavy urban zones.

The Market Cycle: Where Are We?

Yet this downturn, deep and wide-reaching as it is, doesn’t mark the collapse of Canadian real estate. Rather, it signifies a necessary correction, one that realigns the market with fundamentals and purges speculative excess. It also signals a key point in the real estate market cycle: a late-stage correction or recession phase. These periods, though painful, often precede a recovery, especially in markets with strong long-term demand drivers.

When developers stop building, the housing pipeline dries up. This means that as soon as immigration resumes at full pace, which is likely in 12 to 24 months, and as interest rates normalize, the country will face a renewed and intensified housing shortage. Projects delayed or cancelled today will not be completed for years, leading to constrained inventory and rising rents in the future. Investors who understand this timeline will recognize that the groundwork for a rental housing shortage in 2026 and beyond is being laid right now.

In the midst of this environment, the most compelling investment opportunity is multifamily rental housing. Unlike the preconstruction condo market, which relies on buyers with speculative motivations or marginal cash flow, purpose-built rental housing is grounded in real, recurring demand. As homeownership becomes less affordable and population growth resumes, renting becomes a long-term choice rather than a temporary solution. Multifamily properties serve this need while offering consistent income, favorable financing terms, and institutional-grade scalability.

Moreover, municipalities and policymakers are increasingly prioritizing rental development over condo construction. The regulatory and political winds are shifting to favor more stable housing solutions that address affordability and access. Purpose-built rentals, especially when professionally managed, are viewed as a key part of the solution.

It’s also important to note that institutional investors like pension funds, real estate investment trusts, and global asset managers, are steadily increasing their allocations to multifamily assets. They recognize the value of the sector in times of both volatility and growth. As smaller developers retrench, these institutional players will play a bigger role in shaping Canada’s rental housing landscape, and private investors have an opportunity to get ahead of the curve by acquiring, developing, or partnering in multifamily ventures today.

However, timing matters. The construction slowdown is also leading to a potential crisis in skilled labor. The loss of tens of thousands of jobs today means that when activity resumes, there will be fewer experienced workers available to meet demand. This could lead to longer project timelines and higher labor costs. Investors who begin their entitlement and permitting work now will be better positioned to break ground when the market recovers and labor becomes a bottleneck.

Why Multifamily Is Still the Smartest Bet

For all these reasons, multifamily real estate remains the most sound, risk-adjusted investment in Canadian housing today. It benefits from demographic inevitability, counter-cyclical strength, and a favorable policy environment. The current slowdown is masking the underlying fundamentals, but those fundamentals are still intact. In fact, they may emerge stronger after this period of consolidation, as weak projects are cleared out and the industry resets on more solid ground.

While the collapse in preconstruction sales, development jobs, and investor sentiment is unsettling, it is also clarifying. The days of speculative flipping, cash-flow-negative condo investing, and endless launches are behind us, for now. What lies ahead is a market that will reward patience, discipline, and a focus on long-term value. Multifamily housing is at the center of that future.

As The Globe and Mail article concludes, over 100,000 jobs in the construction industry may be lost if the downturn continues. That is not just a statistic, it’s a warning. Supply is vanishing. Demand will return. And those who invest in stable, income-producing rental properties today will be best positioned to benefit when the cycle inevitably turns.

Source: Younglai, Rachelle. “Real estate layoffs mount as homebuilding slowdown deepens.” The Globe and Mail, July 10, 2025.