The Shoebox Condo Collapse Is a Win for Canadian Living Standards

Condo towers in downtown Vancouver in a file photo. The Canadian Press/Darryl Dyck

Commentary

Would you raise a family in a micro condo as small as 600 square feet? How about 300 square feet? For Canadian buyers and renters, the answer is a resounding “No!” This is a disaster for some risk-taking real estate speculators, but a major victory for Canadian living standards.

Just two years ago, the real estate company Remax optimistically pitched micro condos as “innovative and efficient housing solutions” that could help address “the combination of unaffordable housing with more and more people looking for ways to reduce their carbon footprint.” No need to worry about the lack of space—micro condos are “designed to cleverly disguise small spaces to appear spacious and bright.”

The one problem with this pitch? Current or prospective Canadian homebuyers never asked for these tiny units, which are often colloquially referred to as “shoeboxes” or “dog crates.”

If Canadians never asked for them, who are the forests of condo towers going up in downtown areas being built for? Often, for investors. In 2022, 38.9 percent of condo apartments in Toronto were investment properties; in Vancouver, that figure was 34.2 percent.

The smaller the unit, the more popular it is among investors. In Toronto, 64.5 percent of condo apartments built after 2016 under 600 square feet were investment properties. In Vancouver, investment properties accounted for 58.4 percent of new condo apartments under 600 square feet as of 2022.

New condo apartments often rely on investor presales in order to be built in the first place. While some investors intend to rent these units out, many are simply speculators hoping that prices run up endlessly—or at least until they sell.

For some speculators, these bets have paid off handsomely. In the two years before 2022, average condo apartment resale prices rose by more than 19 percent in Toronto and Vancouver—the country’s two biggest condo markets.

It was a big party, but parties are not meant to last. According to a new report by the Canada Mortgage and Housing Corporation, from 2022–2025, condo apartment sales have plummeted 75 percent in Toronto and 37 percent in Vancouver. Condo apartment unit project cancellations have shot up 10-fold in Vancouver since 2022.

For condo investors, the outlook could not be more grim. A TD Bank report projects that condo prices in the Greater Toronto Area will nosedive another 10 percent by the end of the year. The bank notes the likelihood of a “heroic rebound” in 2026 is low.

Several factors have converged to torpedo demand: most notably higher interest rates, but also a general economic slowdown, the nationwide foreign buyer ban put in place in January 2023, and the federal government’s October 2024 immigration cut.

While broad economic and policy trends dovetailed to crash Canada’s micro condo market, the deeper flaw in these units is that Canadians never wanted them in the first place. Even while inventory floods the market at reduced prices as investors seek to offload their micro condo investment properties like hot potatoes, interest remains scant.

In poll after poll, Canadians have expressed a clear preference for spacious homes in which families can live and thrive.

A particularly striking poll conducted by Sotheby’s International Realty in 2018 found that 83 percent of Canadians aged 20–45 would ideally prefer to live in a detached, single-family home. A recent poll by Wahi Realty found that no fewer than 81 percent of Canadians say a backyard is an important feature of a home.

One survey conducted by Point2Homes found that Canadians tend to put the optimal home size somewhere between 1,001–1,500 square feet. And yet, condo sizes have steadily declined well below this range. In the mid-1990s, the average Ontario condo was 1,100 square feet; this has dropped to just 700 square feet today.

Much of this precipitous decline in square footage has been driven by the micro condo real estate speculation frenzy, a trend which is now imploding upon collision with reality.

Real estate speculators stand to lose fantastic sums from this crash—which by most accounts is only beginning. That is the nature of a market economy. You are free to make risky bets, but you also must be prepared to accept the consequences if they go south.

The more fundamental lesson to draw from this strange episode in Canadian real estate is one of consumer preferences.

Prospective Canadian home buyers are not seeking the lifestyle of hyperdense, East Asian cities like Tokyo. They want some space, a backyard even—not an unreasonable desire for citizens of the second-biggest country in the world. While tiny units make sense for some Canadians in certain situations, they are not the right fit for most.

The rejection of the shoebox condo sends a clear message that Canadians expect a more dignified living standard than what they have been recently offered. Going forward, municipal planners should zone accordingly.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.