Why Condo Developers Are Struggling to Get Financing — And What It Means for Housing Supply

The Financing Squeeze Hitting Condo Development

Behind the headlines about home prices and sales numbers, there's a quieter crisis brewing in Canada's condo development sector — one that could affect housing supply for years to come.

The issue? Developers can't get financing because they can't hit presale targets. And when projects don't get built, everyone loses.

How Condo Financing Works

Most banks require developers to presell roughly 70% of condo units before providing construction financing. This threshold exists to protect lenders — if enough buyers have committed, the risk of a project failing drops significantly.

The problem is that 70% presale requirement no longer works in today's market. Toronto condo presales are down more than 90% from their pandemic-era peak. The slowdown has triggered project cancellations, delays, job cuts, and developer defaults across the country.

What Developers Are Asking For

Industry groups are now asking Canada's big banks to loosen financing rules. Some builders want the presale requirement lowered to 50%, while others suggest 30% to 40% would be more realistic given current market conditions.

Banks are reportedly open to discussing changes, but nothing has been formalized yet.

Why This Matters for London, Ontario

You might think this is primarily a Toronto problem, but the ripple effects reach much further. When major markets like the GTA slow their condo construction, several things happen:

Supply constraints tighten everywhere. Fewer condos in Toronto means more competition for existing units, which can push prices up and squeeze out buyers who might otherwise have looked at London as an alternative.

Construction jobs disappear. Southwestern Ontario's construction industry is interconnected. Fewer projects mean fewer jobs for skilled tradespeople who work across the region.

Future housing supply shrinks. The condos not built today are the missing inventory of 2027 and beyond. Canada already has a well-documented housing shortage — stalled projects only make it worse.

London's Development Landscape

Locally, we're seeing continued growth in areas like the West 5 development along Commissioners Road, new builds in Talbot Village, and ongoing construction near Western University and Fanshawe College. These projects serve real demand — students, young professionals, downsizers, and families seeking walkable urban living.

But development financing challenges in major markets can affect lending practices everywhere. Banks that tighten standards in Toronto don't necessarily loosen them for London projects.

The Bigger Picture: CMHC and Rental vs. Condo

Here's an interesting wrinkle: unlike condo developments, purpose-built rental projects can access CMHC financing support. This creates an uneven playing field where rental construction may continue while condo projects stall.

For buyers hoping to purchase rather than rent, this dynamic could mean fewer options in the years ahead.

What Buyers and Sellers Should Know

If you're considering a pre-construction purchase, due diligence matters more than ever. Understanding a developer's financial position, the project's presale status, and the timeline to completion can help you avoid the disappointment of a cancelled project.

For sellers, particularly those with condos in established London neighbourhoods like Old North or near downtown, existing inventory may become more valuable as new supply slows.

Navigating Uncertainty

Market conditions are complex, and the financing challenges facing developers add another layer of uncertainty. Working with a REALTOR® who understands these dynamics can help you make decisions with confidence.

At Calford & Co. Real Estate Team, we stay on top of the factors affecting London's real estate market — both locally and nationally.

Reach out to Nickey Calford to discuss how these trends might affect your real estate plans.