How do we get to where apartment prices fall?
Nationally, apartment prices soared more than 29% between January 2021 and April 2022, according to the Canadian Real Estate Association (CREA). Apartment prices have fallen 12% since the peak of spring 2022. The Greater Toronto Area (GTA) decline is even more pronounced, with CREA reporting a 19% drop in apartment prices.
A Toronto apartment buyer, who bought it in the spring of 2022 at a peak benchmark price of $730,500, may have fallen 5%, or $36,525. The current benchmark apartment price is $593,000 (as of April 2025), which means that initial deposit plus over $100,000 of value has been eliminated. Even if the buyer still wants to close the purchase, the lender they choose may no longer want to raise funds for it.
If you can’t close your pre-built apartment, what options do you have? Let’s look at different situations.
What happens if you sell your apartment at a loss
To determine potential financing, lenders usually use the assessed value of the property when closed, even if the buyer signs a purchase agreement, even if they obtain a pre-approved mortgage. When prices fall, buyers may find that they cannot borrow as much as they expect to buy prices.
Some real estate developers work with banks to provide financing based on purchase price rather than assessed value. This may allow buyers to borrow more money, but it does not change the “underwater” assets they may purchase, with more debt than value.
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Buyers in Canada can try to find other sources of financing, such as savings, borrowing real estate they already own or real estate they borrow from family or friends. Private lenders may lend more than banks, despite higher interest rates and higher fees and restrictions. Or they can try selling the unit before closing. This is called homework sale. However, buyers’ deposits to the property may fall below the price of the property, and they even have to pay the assignee to take over the contract and close the apartment. Please note that task sales may require approval from developers or additional fees. Therefore, selling before closing may be impossible or practical.
If you can’t sell the apartment, even if you lose money, you can’t get a mortgage, do you have any other options?
