Vulture Funds

Happy Monday Morning!

For the past several years this newsletter has highlighted the slow motion trainwreck that is the new condo market. The math on pre-sales hasn’t worked for a long time. Quite simply, the cost to deliver new supply was well above the resale market. The gap grew ever larger but the market didn’t care. Eager investors continued to pay steep premiums, blinded by the euphoria of a historic bull market.

Then, in March 2022, the music stopped.

The Bank of Canada began a rate hiking crusade, and immediately put an end to the euphoric pre-sale market.

Fast forward to today. New home sales in the GTA are running at 45 year lows. There were just 5314 new units sold in 2025. The lowest levels on record since they started collecting data, and 81% below the ten year average. Totally dead.

The pain is becoming too much for government to ignore.

A few weeks ago we learned the Ontario Government was partnering with investment firm ‘High Art Capital’ by announcing a $1.3 billion partnership to turn roughly 2,200 unsold GTA condos into rental units. The province is using the new Building Ontario Fund (BOF) to buy already built condos. The partnership will purchase blocks of at least 10 condos, built after January 1, 2023. Privately-run rental firms will manage them, and 25% of the units will be “affordable.”

Source: High Art Capital

This week, we learned the Ontario Government, in partnership with the Federal Government, is planning to temporarily remove the Harmonized Sales Tax (HST) for buyers of new homes.

Premier Doug Ford announced the plan, saying the full 13% tax will be removed for new homes valued up to $1.5 million from April 1, 2026 to March 31, 2027 for both primary end-users, and investors.

"Please get everything together, you have one year ... talk to your bankers and start buying the homes.” said Ford.

Convenient timing to say the least.

The taxpayer backed vulture fund will immediately save themselves 13% in purchasing costs with the stroke of a pen.

The Real Estate bailout has begun. The only thing that’s surprising is how long it took.

We expect more goodies are on the way, and not just for Toronto.

Keep in mind, nearly 9% of the Canadian labour force is employed in the construction sector, and the fallout is not contained to just the GTA.

New home sales are equally as dreadful in Metro Vancouver. Altus Group data shows the numbers are slightly higher than Mr. Jarvis suggests, currently sitting at 121 condo units sold this quarter. Down from a peak of nearly 6000 quarterly sales back in the bull market.

Source: Altus Group, Steve Saretsky

Meanwhile, we have 11,000 unsold new condos currently sitting on developer balance sheets. This is effectively “shadow inventory” as most of these units are not listed on the MLS.

I’m not aware of any vulture funds in Vancouver, but there’s probably a business idea here.

Last year the development community lobbied the federal government to remove the foreign buyer ban on the sale of new homes.

Freshly annointed housing minister, and former mayor of Vancouver, Gregor Robertson, seemingly obliged.

“We need to figure out the best role for offshore capital to play in the housing market,” the former Vancouver mayor said in an interview with Bloomberg News.

“We need to make sure housing is built and owned for Canadians first,” he said. “That said, we’ve seen more innovation on this in countries like Australia that enable some foreign investment into higher-end new homes, or in some cases rental housing.”

The foreign buyer ban officially expires January 01, 2027. We expect the taps will be turned back on, at least for new construction purchases. After all, the demise of the pre-sale market is started to put a dent in government tax coffers.

Let’s watch.