Background on Appraisal Practices
In October 2025, the Office of the Superintendent of Financial Institutions (OSFI) quietly informed major lenders about concerns regarding appraisal practices as the Canadian condo market began to correct sharply. This warning has now escalated, as OSFI has publicly cautioned that blanket appraisals for pre-construction condos could potentially breach federal mortgage rules.
Current Market Conditions
As of March 2026, the Canadian real estate landscape, particularly in the Greater Toronto Area, has witnessed significant changes. The average price in the Toronto Regional Real Estate Board has fallen to $626,650, marking a decline of approximately 21.7% from its peak in 2022. Additionally, pre-construction prices in some projects have decreased by 10% to 30% from their previous highs.
Impact on Condo Sales
Condo sales in the Greater Toronto Area have also been affected, with transactions plummeting to 1,088, a staggering drop of more than 60% compared to the same period four years ago. This decline reflects a broader trend in the housing market, where average Toronto rents decreased by 7.1% in 2024, and condo rents fell by 5.2% nationwide, according to the Canada Mortgage and Housing Corporation (CMHC).
Regulatory Concerns
OSFI has flagged the 80% loan-to-value expectation on uninsured mortgages as a central issue, emphasizing that using blanket appraisals in a falling market can lead to uninsured mortgage loans exceeding 80% of market value at origination. This situation poses significant legal exposure for lenders, prompting discussions between the Canadian Bankers Association and OSFI regarding the financial implications of these appraisal practices.
Timing and Market Normalization
The regulator highlighted that the timing of blanket appraisals becomes problematic in a declining market, as internal minutes from OSFI indicate that such practices work effectively only when property values are on the rise. However, there is disagreement among stakeholders regarding how quickly the market will normalize, leaving many uncertainties in the air.
Statements from Financial Institutions
In response to these developments, representatives from financial institutions, such as the Royal Bank of Canada, have stated that once a mortgage is approved, it remains valid until the closing date. They also noted that mortgage approvals are based on the closing date provided by builders, which may further complicate the situation as market conditions fluctuate.
As the Canadian condo market continues to face challenges, the implications of OSFI’s warnings are significant for both lenders and potential homeowners. The long-term impact of these regulatory changes remains uncertain, and details regarding the timeline for market normalization are still unconfirmed.