From Smart Living to Squeezed Living: Why Canada’s Micro-Condos Are Falling Out of Favour
When Maggie Hildebrand moved into her first Toronto apartment, everything she needed was technically within reach. Her kitchen, dining area, work desk and bed all fit neatly into a single 300-square-foot room. For a young professional eager to live close to downtown, it felt like a practical starting point.
That feeling didn’t last.
“It became incredibly isolating,” the 28-year-old recalled. “It felt less like a home and more like somewhere you park worker bees overnight.”
Hildebrand was living in one of Canada’s now-familiar micro-condos — ultra-small units that have multiplied across skylines in cities such as Toronto and Vancouver over the past decade. Once marketed as clever, affordable solutions to soaring housing costs, these units are now at the centre of a deepening condo market slump, losing value faster than any other segment.
A market in retreat
Canada’s condominium market is facing its sharpest downturn since the 1980s. In Toronto and surrounding areas, thousands of completed units remain empty and unsold. Over the past year alone, 18 condo projects were cancelled in the city, with more expected as buyer interest continues to fade.
Micro-condos have been hit especially hard. Some units that sold for around C$500,000 just a few years ago are now reselling for C$300,000 or less – a dramatic shift in a city often ranked among the world’s least affordable.
“It’s a race to the bottom,” said Shaun Hildebrand, president of market research firm Urbanation, which has tracked Toronto’s high-rise market for decades. “Prices ran ahead of reality, and now they’re correcting quickly.”
Built for investors, not living
The downturn has revived a long-running debate about who micro-condos were really designed for. Critics argue developers prioritised investors over residents, shrinking unit sizes to keep headline prices low in cities where land costs are exceptionally high.
Statistics Canada data supports that view. Investors own the majority of Toronto condos under 600 square feet, and construction of these small units surged in 2016. Today, they account for nearly 38% of new condos in the city, up from less than 8% previously.
While micro-units exist elsewhere, they never took off in the United States to the same extent. There, they still represent a small slice of the market, even though their presence has grown gradually over the past decade.
Too much supply, sudden shifts in demand
One major factor behind the slump is oversupply. Developers spent years building aggressively to accommodate rapid population growth, driven largely by immigration. But policy changes aimed at easing housing pressure sharply reduced the number of newcomers.
A December report from the Bank of Montreal showed Canada’s population recorded its steepest decline in 2025 since the 1940s, excluding the pandemic year. Immigration caps played a central role, leaving tens of thousands of newly completed condo units without enough buyers or renters.
“The market simply got ahead of itself,” Shaun Hildebrand said. “Developers built for demand that vanished almost overnight.”
The price shock
Interest rates also reshaped the landscape. During the pandemic, ultra-low borrowing costs encouraged investors to pour money into real estate, assuming prices would keep climbing. For a time, they did – often reaching levels that no longer aligned with incomes or rental returns.
When the Bank of Canada raised rates to fight inflation, those assumptions collapsed. Many investors who bought micro-condos off-plan at peak prices are now struggling to close deals or are forced to sell at losses. Others are staying away entirely, waiting to see how far prices fall.
Canada’s temporary ban on foreign homebuyers, introduced in 2022, may have added to the uncertainty. While foreign buyers make up a small share of owners, some analysts believe the policy shift sent a broader signal that cooled investor sentiment.
A silver lining for renters
For renters like Maggie Hildebrand, the downturn has brought unexpected relief. She now lives in a 700-square-foot one-bedroom apartment in an older building, complete with a leafy backyard, paying only C$200 more than she did for her micro-condo.
The difference, she said, is life-changing. “I can actually host people now. I’m having 25 guests for my birthday – that would have been impossible before.”
Greater supply has slightly softened rents and expanded options, particularly in downtown areas once dominated by investor-owned units.
Rethinking the future of condos
Industry watchers believe the crash will force developers to rethink their priorities. Instead of targeting short-term investors, future projects may focus more on people who plan to live in their homes long-term.
“We’ve learned a hard lesson,” Shaun Hildebrand said. Micro-condos won’t disappear entirely, he added, because affordability still matters. “But we pushed the concept too far.”
Some buyers are already taking advantage of the shift. Toronto estate agent Alex Cruz says bargain hunters are snapping up smaller units when the price per square foot makes sense. “For some people, this is their first real chance to get into the market,” he said.
A bigger housing dilemma
The condo slowdown comes at a delicate moment. Housing affordability has become a central political issue, with Prime Minister Mark Carney pledging to double the pace of homebuilding over the next decade.
Yet with thousands of condo projects now paused or cancelled, fewer units will reach the market in coming years – potentially deepening shortages in major cities that rely heavily on high-rise housing.
Low prices, experts warn, may not last.
“The real question,” Shaun Hildebrand said, “is how long this downturn lasts – and what it means for housing supply five or ten years from now.”
For now, Canada’s micro-condos stand as symbols of an idea that once promised efficiency and affordability, but increasingly feels out of step with how people actually want to live.
