Another factor that helped investors earn large profits over this period was that they simply needed to provide a deposit worth 20% of the purchase price for a presale unit. The ability to secure a unit by paying a fraction of the cost up front resulted in investments that created the potential for large returns as a share of the initial cost. This was especially true for short‑term investors. In many cases, these investors never needed to finance the full purchase price since they were able to sell the unit before it was completed.

Here’s a simple example of how an investor could have generated a large return.

Let’s say an investor bought a presale condo worth $1 million in 2016, putting down the $200,000 deposit up front. Just before construction wrapped up three years later, the value of the unit had increased by 40% to $1.4 million. The investor sold the unit at this new price and earned a profit of $400,000, doubling their initial investment. This average return is much stronger than more traditional investment vehicles like stocks or bonds.

But this strategy could also lead to large percentage losses. Let’s say that same condo investor in 2022 put down a $200,000 deposit to buy a presale unit valued at $1 million. Three years later, the prevailing market price had dropped to about $700,000. Despite this decline, the investor still legally owes the builder $1 million, as per the initial contract. An investor choosing to sell would then lose about $300,000—the initial deposit and then some.

Shifts in demographics and interest rates are contributing factors in this change in circumstances.

During the COVID‑19 pandemic, high population growth and low interest rates propelled demand and resale prices to record highs. The rapid growth in demand also put upward pressure on rents, which made owning a condo to rent out more financially attractive.

However, over the past few years, interest rates have increased and population growth has fallen sharply, while the supply of condos has expanded due to a surge in new construction over 2021–22. The result has been price declines, with many new condos worth less than their presale purchase price—making these units a less attractive investment than they were during the preceding decade.

This combination of factors has led to substantially fewer purchases of presale units (Chart 3), which is causing builders to hold off on future projects.