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Toronto is set to overtake Vancouver as Canada’s most expensive housing market next year.
Recent trends indicate that Toronto’s real estate market is gearing up for significant growth in 2025. While the past two years saw stagnating prices, declining interest rates and rising demand are expected to drive a surge in activity.
Declining interest rates boosting recovery
With interest rates dropping, the stage is set for Toronto’s housing market to bounce back strongly. Cities like Halifax, Montreal, and Calgary have already experienced recovery, while Toronto and Vancouver are now poised to catch up. This shift is expected to elevate Toronto to the top of Canada’s housing market, surpassing Vancouver in price competitiveness.
Factors fueling growth
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High demand and immigration:
Canada’s robust immigration policies continue to attract skilled workers and entrepreneurs, especially to major cities like Toronto. This influx fuels demand for housing in a market already constrained by supply. -
Resilience of home ownership:
Canadians maintain a strong belief in home ownership, with a home ownership rate of 66.5% in 2021—among the highest in the world. Young buyers, despite affordability concerns, still see owning a home as an attainable goal. -
Condo market rebound:
Toronto’s condo market, which slowed in recent years due to rising borrowing costs, is expected to pick up as interest rates fall. First-time buyers and investors are likely to re-enter the market, driving up condo values by early 2025.
Challenges in the housing supply
Canada’s housing market is facing a major shortage of homes because construction hasn’t kept up with demand for years. In Toronto, it now takes about 25 months to get approval for multi-unit housing projects, compared to just 10 months in 1995. On top of that, building costs in the city have gone up by 110% since 2018, making homes even less affordable. The process is also slowed down by rules for environmental reviews, building density, and transportation needs.
The outlook for Toronto
Demand for housing in Toronto is expected to surge next year, leading to sharp price increases. The condo market, in particular, is likely to rebound as lower interest rates attract buyers and investors.
While the city’s high housing costs may push some residents to consider more affordable regions like Atlantic Canada and Calgary, Toronto remains a hub for economic and cultural activity, sustaining demand for homes.
Although affordability pressures are mounting, governments are taking steps to address the supply shortage. These efforts, coupled with a vibrant economy, are expected to support Toronto’s high home ownership rate, even as prices climb.
Adapting to change
Toronto’s housing market continues to evolve, with hybrid work and migration within the GTA playing a role. Communities surrounding the city, such as Orangeville and Burlington, are increasingly appealing to commuters seeking affordability.
While high housing costs may deter some buyers, others are turning to creative strategies to build wealth. For example, leveraging tax-advantaged accounts like a TFSA can be a smart way to save or invest towards a future home purchase.
Despite challenges, Toronto remains one of Canada’s most dynamic real estate markets. With strong demand, falling interest rates, and a focus on housing solutions, the city is well-positioned for a housing boom in 2025.
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