Residential property developers in Canada are increasingly facing insolvency as rising borrowing and construction costs take their toll. Industry experts warn that this trend could worsen, with interest expenses remaining high. Data from the federal Office of the Superintendent of Bankruptcy reveals a surge in insolvent real estate companies and projects over the past year, with numbers expected to surpass levels seen during the global financial crisis.
From January to May 2024, Canada averaged about 20 real estate insolvencies per month, potentially reaching 240 by the year’s end—a 57% increase from 2023 and a 13% rise from the 2009 peak. Smaller developers are particularly hard-hit; for instance, Maplequest Ventures in Brampton and King David Inc. in Markham defaulted on loans due to escalating interest rates, resulting in court-appointed receivers taking over their projects.
The situation is compounded by an 81% increase in construction costs across Canada’s major cities since 2017, with costs in the Toronto region more than doubling. The Bank of Canada’s interest rate hikes have made loans more expensive, squeezing developers’ profit margins and forcing many into receivership for failing to pay their bills. The real estate sector now accounts for 55% of all receiverships in 2024, a significant increase from previous years.
The pressure on developers has been building since 2017, driven by a surge in demand for new condos in Toronto, record preconstruction sales, and pandemic-related delays that further increased costs. With residential construction costs at unprecedented levels and borrowing remaining expensive, many developers are struggling to keep their projects viable. Lenders, who initially entered into forbearance agreements, are now less willing to accommodate missed payments, leading to a rise in insolvency cases and receiverships across the country.
