“Chronic” Supply Issue Pushing Toronto Housing Market Further Out of Reach

While affordability has played a significant role in the decline of home-ownership rates in the GTA over the past decade, an assortment of secondary issues has contributed to the downturn in the Toronto housing market. The OSFI stress test, combined with land transfer taxes (especially in the City of Toronto), availability of housing supply, and a population uptick have made the dream of home ownership more elusive to a growing number of first-time buyers. The average price of a residential property in the GTA more than doubled between 2006 and 2021, rising by 211 per cent to almost $1.1 million, according to Toronto Regional Real Estate Board’s MarketWatch. During the same period, Statistics Canada Census Data reported home ownership levels in the Toronto Census Metropolitan Area (CMA) declined after peaking at 68.3 per cent in 2011, falling to 65.1 per cent in 2021.

Freehold detached, semi-detached, townhomes and row housing remain most sought after in the GTA, but they are also the most expensive options. Condominiums, as a result, now represent the first step to home ownership for many. More than one in three homes sold in the Greater Toronto housing market is now a condominium apartment or townhouse. In 2024, the average price of a condominium apartment sat at $702,858, while the cost of a condominium townhouse hovered at $803,246, down 2.1 per cent and 3.1 per cent respectively from year-ago levels. Fewer freehold properties have been built in recent years, prompting buyers to scoop up smaller homes and semis. Many have since been renovated, given additions, or demolished and rebuilt as buyers revitalize older neighbourhoods throughout the city. This is anticipated to push lower rise prices higher and further out of reach for first-time buyers in the years ahead, particularly as low-rise homes comprise a smaller portion of total sales amid the city’s intensification. Affordability remains a challenge for first-time buyers despite a slight dip in pricing year-over-year. The average price of a detached home in the GTA at year-end 2024 sat at $1,453,262, while a semi was priced at $1,102,568.

Housing supply is one of the most prevalent issues facing consumers in the Toronto housing market, with the housing crisis described as a “chronic” issue. Population growth and housing demand in the GTA continue to outpace new housing supply. Meanwhile, the city and its surrounding areas have grown at a steady clip. The population of the country’s largest metropolitan area, the Toronto CMA, rose close to five per cent between 2016 and 2021 to just over 6.2 million. While the City of Toronto climbed 2.3 per cent, suburban markets including Brampton, Oakville, Milton, Caledon and King soared, recording double-digit growth during the same period. In July 2024, the population of the GTA surpassed 7.1 million. This comes at a time when the market is at a crossroad in terms of inventory levels, with thousands of units available for sale but very few designed for family living.

For years, there has been an obvious disconnect between builders and homebuyers. While municipalities are laser-focused on high-density projects offering more units with less square footage, homebuyers are looking for the opposite – larger properties that offer more square footage. Yet, Statistics Canada reported the median size of non-investment condominiums built between 2016 and 2020 in Toronto sat at approximately 680 sq. ft., while those targeting investors averaged about 615 sq. ft.

Development costs instituted by the city have also contributed to the decline in home ownership levels. Between 2020 and 2022 alone, development charges rose 21 per cent in the City of Toronto, rising to $189,325 per unit for low-rise construction in 2022—the highest in the country, according to the Canadian Home Builders Association and Altus Group Economic Consulting. This has contributed to a decline in housing starts in Ontario, currently down 13,952 year-over-year (2024 vs. 2023). The need for a revised city plan—which has so far failed to address or keep pace with future needs—given that outdated policies and zoning bylaws, climbing costs and fees faced by builders and developers and a slow approval process are ongoing barriers to new construction, and to some extent, repurposing or renovation of existing product. Without remedy or greater incentive, new projects will fail to move forward.

The climate for condominiums has changed substantially in recent years, given the decline in pre-construction starts and an uptick in failed transactions. Assignments in the market have soared as a result, with builders abandoning condominium construction and shifting toward purpose-built rentals. The math simply does not work for developers, given the current cost of construction, especially when factoring in development costs, material costs, labour shortages and wage increases, Overall inventory levels have climbed in the Toronto Regional Real Estate Board as a result, with an estimated 7,400 active condominium and apartment listings available for sale at the end of 2024 and an estimated 30,000 new units expected to be released by developers in 2025.

Although these recent moves on a national level will ease entry for many homebuyers in the short-term, in the longer-term, it may take years to successfully remedy pervasive challenges in the Toronto housing market. Supply, demand, affordability, development issues, red tape and other barriers are likely to be key factors impacting home ownership rates as effective solutions remain hotly debated but slow to fruition.