Why does a 20 percent price drop matter so much for pre-construction?

Because most builder contracts took roughly a 20 percent deposit. While the unit is worth more than 80 percent of the original price, closing still beats forfeiting the deposit. Once the value falls further than the deposit, every additional point of decline is a new loss on top of money already gone, and the incentive to close disappears.

Is 2026 the worst year for condo completions in Toronto?

It is the largest. Roughly 28,000 units are scheduled to complete in 2026, and most were sold between 2020 and 2022 at prices well above today's market. That combination of record completions and a wide price gap is why 2026 is the year the problem concentrates.

30% of New Condos Are Failing to Close: What Pre-Construction Buyers Face in 2026

Last updated: August 2026

If you bought a pre-construction condo in Toronto in 2021 and you can’t close on it, you lose your deposit first, and then the builder can still come after you for the difference between what you agreed to pay and what they eventually sell it for. Walking away is not a clean exit in Ontario. That is the part most people find out far too late, and it is why I wanted a real estate lawyer to explain it plainly rather than another agent guessing at it.

I had Mark Morris on the podcast, a Toronto real estate lawyer who runs the firm Legal Closing. He spends his days on the files nobody posts about on Instagram: the buyer who signed in 2021, watched the value fall, and now has ninety days to find money that does not exist. This is the conversation, with the numbers brought up to date.

15-20%

of buyers in most Toronto buildings are facing closing difficulty in 2026

~28,000

units scheduled to complete in 2026, the largest year on record

22%

fall in resale condo price per square foot from the Q1 2022 peak

Sources: industry completion and closing-difficulty estimates reported through 2026; TRREB and resale price-per-square-foot data, Q1 2022 peak of roughly $1,045 against roughly $812 in 2026.

Adam Nadler and real estate lawyer Mark Morris recording the Supply and Demand podcast episode about pre-construction condo buyers who cannot close

Why a 20% Price Drop Is the Number That Breaks the Deal

This was the part of the conversation that stopped me cold, because it turns a vague sense of “prices are down” into a specific tripwire.

Most builder contracts took roughly a 20% deposit. So long as the unit is still worth more than 80% of what you agreed to pay, closing is painful but rational, because walking away means forfeiting that deposit anyway. The moment the value falls further than the deposit, the maths inverts. Every additional point of decline is a fresh loss stacked on money already gone, and the reason to close evaporates.

“Every point below 20% is a new loss for them, given that deposits are 20%. And we’ve been below 20% losses for maybe a year or two at this point, which is why the assignment market went the way it did.”
— Mark Morris, real estate lawyer, Legal Closing

Mark described units in Moss Park that sold at $1,400 to $1,600 per square foot in 2022 and were changing hands at $850 to $900 by the time we spoke. His point was not the headline number. It was that once the gap is that wide, the deposit stops being the deciding factor.

Why the assignment market stalled before defaults rose

Assignments cleared while the unit was still worth more than the deposit at risk, because a new buyer could see value in taking over the contract. Once resale prices fell far below the original purchase price, that buyer disappeared. As Mark put it: “it’s $850 versus $1,600. Who’s going to make that deal?” The assignment market drying up was the warning sign, not the problem itself.

What Actually Happens If You Can’t Close

Here is the sequence, in the order it happens.

Your deposit is gone

The builder keeps it. On a typical 20% deposit against a $700,000 unit, that is $140,000 before anything else is decided.

The builder resells the unit

Usually at today’s price, which is the whole reason you could not close. The shortfall between your contract price and the resale price is the number that matters next.

The builder can sue you for the difference

Your liability is not capped at the deposit. The shortfall, carrying costs while the unit sat, and legal fees can all be claimed. This is the step buyers consistently do not expect.

The commission gets clawed back

Builder contracts typically allow the builder to reclaim commission already paid to the agent on a deal that later collapses, which is why some agents are now feeling this too.

The pressure moves up the chain

Builders carrying a high default rate still owe their construction lenders. That is how a buyer’s individual problem becomes a lender’s problem, and eventually a market-wide one.

Losing the deposit is the floor, not the ceiling

The single most common misunderstanding I hear is that walking away costs you your deposit and nothing more. In Ontario an agreement of purchase and sale is a binding contract. If the builder resells for less, the shortfall is yours. Speak to a real estate lawyer before you decide anything, not after.

Real estate lawyer Mark Morris explaining why pre-construction buyers are failing to close on Toronto condos

How Many Buyers Are Actually Failing to Close?

I want to be careful here, because this is the number everyone quotes and it moves.

When we recorded in May 2025, Mark was describing failure rates approaching 25 to 30% on new construction reaching completion. That was what he was seeing in his own files.

Industry reporting through 2026 puts the figure at roughly 15 to 20% of purchasers facing closing difficulty in most Toronto buildings. Both can be true at once. A lawyer who specialises in closings sees a caseload weighted toward the deals in trouble; the market-wide average includes every buyer who closed without incident.

Measure	May 2025 (episode)	2026 (current reporting)
Buyers facing closing difficulty	25-30% (lawyer’s caseload)	15-20% (most Toronto buildings)
Resale condo price per sq ft	Falling from the 2022 peak	~$812, down about 22% from ~$1,045 in Q1 2022
Units completing	Cycle beginning to hit	~28,000 in 2026, the peak year

What this means if you are the buyer

The direction of travel has not changed since we recorded, and 2026 is the year the volume concentrates. If your unit is completing this year and the gap worries you, the worst move is waiting to see whether the market rescues you before closing day.

The Part Nobody Talks About: This Was Never Only About Condos

The line from Mark that has stayed with me had nothing to do with pre-construction at all.

Every person, even if you didn’t purchase a new construction, people were only being able to afford their home by virtue of the guy who’s sitting in his basement.

His argument is that a large share of the market was underwritten by rental income, whether that was a basement apartment covering part of a mortgage or an investment condo that was supposed to carry itself. When the rental assumption weakens, the pressure does not stay in the pre-construction segment. It spreads to anyone whose purchase depended on someone else paying rent.

That is a bigger claim than a condo story, and it is the reason this episode is worth an hour of your time even if you have never bought pre-construction.

What I’d Do If This Is You

Call a real estate lawyer first, not an agent. This is a contract problem before it is a pricing problem, and the sequence matters.
Get the real gap in writing. What you contracted at, what comparable units are actually selling for now, and what your deposit represents as a percentage.
Start before the ninety-day window. Options exist earlier that do not exist on closing day. Financing, an assignment at a loss, and a negotiated outcome with the builder all need lead time.
Do not assume the deposit is the whole cost. It is the first cost.
If you are an agent on one of these files, check the commission claw-back language in the builder agreement before you count that money.

Bar chart comparing two measures of the Toronto condo correction from the first quarter of 2022 to 2026: average price down about 12.7 percent, price per square foot down about 22.3 percent

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Frequently Asked Questions

What happens if you can’t close on a pre-construction condo in Ontario?

You lose your deposit first. If the builder then resells the unit for less than your purchase price, the builder can also sue you for the shortfall, plus carrying costs and legal fees. Your liability is not capped at the deposit, which is the part most buyers do not expect.

How many pre-construction buyers are failing to close in Toronto?

Industry reporting in 2026 puts it at roughly 15 to 20 percent of purchasers in most Toronto buildings. When this episode was recorded in May 2025, Mark Morris was seeing closer to 25 to 30 percent in his own files, which reflects a closing lawyer’s caseload rather than a market-wide average.

Why does a 20 percent price drop matter so much?

Because most builder contracts took roughly a 20 percent deposit. While the unit is still worth more than 80 percent of the contract price, closing beats forfeiting the deposit. Once the value falls further than the deposit, every additional point of decline is a new loss on top of money already gone.

Can I assign my pre-construction contract to get out of it?

Only if someone else sees value in taking it over. Assignments cleared while units were worth more than the deposit at risk. Once resale values fell well below the original price, that buyer disappeared, which is why assignment activity stalled before defaults started rising.

Is 2026 the peak year for this problem?

It is the largest year for completions, with roughly 28,000 units scheduled. Most were sold between 2020 and 2022 at prices well above today’s market, so the volume and the price gap arrive together.