Updated: Mid 2026
For years, “buy preconstruction and watch it appreciate” was treated as a near-guaranteed strategy in Toronto. That’s no longer the full picture. Unfortunately, prices detached from rental income, and investors in the GTA were only purchasing properties based on potential future appreciation, not on potential income.
We feel there’s been a quiet reset. Many investors have left the market after being burned in the 2022-2026 market downturn, and with prices only projected to start improving in a few years, many investors today are buying on a very long-term horizon, or they are focused on properties with high rental potential relative to the purchase price.
Is Preconstruction Still a Good Investment in 2026?
Our honest answer: it depends on your timeline, and your expectations. If you’re looking for high rent relative to purchase price, that’s unlikely in this market because rents have dropped from their 2023 highs. And if you’re looking for market appreciation, the overall consensus is that there is space for price recovery, but the horizon for that is a few years. (Maybe 2 years from today, it’s mid 2026 right now).
Why we think prices will go up:
- For many buildings and neighbourhoods, condo prices have dropped to their 2018 levels
- Preconstruction sales are at all time lows, leading to tens of thousands of units being cancelled
- Developers are converting would-be condo projects into purpose-built rentals
- Major investment funds are purchasing up unsold, or defaulted, new construction condo units
- Starting in 2027, new completions are going to start dropping significantly, and by 2030, there will be virtually no new condos coming to the market
- The condo construction industry is significantly delayed. It takes almost a decade from plans to final completion, so once construction slows down, and trades are laid off, it will be extremely difficult to restart building at previous capacity without available trades.
How Much Money Do You Actually Need to Start?
If you’re buying to live in the unit yourself, you generally need enough for your deposits (commonly 15–20% of the purchase price, spread over the construction period), a mortgage for the balance of the purchase price, and money set aside for closing costs.
Closing costs usually come in somewhere between 3.5-5.5% of the purchase price. However, investors are expected to pay an additional $23,000 which they can then claim back in a rebate if they rent the property out.
Some preconstruction condo buyers purchase properties they never intend to close on. These buyers are called flippers, and they are looking to assign their contract at a later date for a profit. This is speculative investing, and it can be dangerous. Many investors made significant losses after buying condos at 2021/2022 prices. We always advise clients that if they are going to invest in a preconstruction condo, they should be able to buy the unit when it’s completed, even if their plan is to assign it before closing.
Understanding the Deposit Structure And Time In Market Sentiment
One of preconstruction’s real advantages is the staggered deposit and the time in market before closing. The theory behind investing in preconstruction is that you can purchase a property at X price, and enjoy 100% of the appreciation of that asset while paying a staggered deposit of only 20% of the total cost. That means the return on investment is leveraged.
Here’s an example: You purchase a condo today for $600,000. The condo will be ready in 6 years. Over the next year, you put down 20% ($120,000). If that condo appreciates to $800,000 in 6 years, you are making a $200,000 profit on top of your $120,000 deposit. The best part: there is no tenant, no mortgage, maintenance, taxes, or insurance.
Of course there are closing fees, resale fees, lawyer fees, interim occupancy rent, development levies etc. But the trade off is an almost 100% hands-off investment in real estate, which is rare.
There is risk when buying preconstruction. Mainly from cancellations of projects. It’s not very common, and by-law your deposits should be held in a safe trust account. But some investors place 20% deposits in trust, and after 6+ years, their project is cancelled and they are returned their deposits without interest.
Financing an Investment Unit
Lenders treat investment purchases differently than owner-occupied ones:
- Rental income from the unit may only be partially counted toward your mortgage qualification (lenders typically apply a discount to projected rent).
- You’ll be stress-tested against a qualifying rate regardless of your actual contract rate, so make sure your numbers still work at a higher rate than you’re currently being quoted.
- As you approach final closing, your financial situation gets re-underwritten. Income, debt, and credit changes since your original agreement can all affect your final mortgage approval, so don’t assume your financing is locked in just because you qualified years ago at signing.
Tax Considerations for Investors
Buying as an investment changes your tax picture in a few important ways:
- HST. If you don’t intend to live in the unit as your primary residence, you generally won’t receive the builder’s standard rebate credit at closing, and may need to pay that amount out of pocket, then apply separately to recover it once you have a qualifying lease in place. Rules here have shifted meaningfully in 2026 — see our full breakdown of preconstruction closing costs for the current details.
- Capital gains vs. business income. If the CRA views your purchase as speculative rather than as a long-term hold, your profit on sale may be taxed as business income at your full marginal rate, rather than as a capital gain (only half of which is taxable).
- Land transfer tax and rebates. First-time buyers incentives and credits are intended for first-time buyers who purchase primary residences, if you buy an investment property, you may not be eligible to use your first-time buyer credits.
We’re real estate agents, our speciality is selling real estate, if you’re buying a property as an investment, it’s important to discuss the tax details with your accountant.
The Biggest Risks Right Now
A few risks worth taking seriously in the current market, beyond the standard preconstruction risks of delays and cancellations:
- Appraisal risk at closing. If the unit’s value has softened by the time your mortgage is finalized, your lender may not appraise it at your original purchase price, which can leave you needing more cash to close than originally planned.
- Oversupply in certain segments.Elevated condo completions in some areas have pushed rental vacancy higher and softened asking rents, which directly affects your cash flow if you’re planning to rent the unit out.
- Longer time to find a tenant or buyer. A softer market generally means more competition among landlords and sellers, so build extra time into your plans rather than assuming a quick lease-up or resale.
What If You Need to Exit Before Closing?
If your circumstances change before the building registers, you may be able to assign your contract (selling the purchase agreement itself rather than the finished unit). This comes with its own set of rules, restrictions, and costs that are different from a typical resale.
We cover this in detail in two other guides:
– 6 Facts to Consider Before Selling a Preconstruction Assignment
– How to Market a Preconstruction Condo Assignment
How to Pick a Project That Holds Up
Not every project performs the same way, even in the same neighbourhood. The building’s reputation, the developer’s track record, the specific unit’s layout, and its position within the building all affect both your rental prospects and your resale value down the line. We break this down fully in our guide to picking the best preconstruction units.
Final Thoughts
Preconstruction can still be a strong long-term investment, but 2026 is a market that rewards patience and real math over speculation. Run the actual numbers on cash flow, understand your tax exposure, and go in with a realistic view of today’s rental and resale conditions. A long-term purchase today will likely offer a great return in the future, but it could take a bit of patience to finally see strong price growth.
If you’re considering a preconstruction investment, contact us today.
