In February 2022, the price of an average new single-family home in the Greater Toronto Area (GTA) was $1,838,396, while the average for a new condo was $1,252,515, and inventory stood at a low point of just over 9,000 units.
Fast forward to today: the average price of a new single-family home is $1,505,530, $1,021,339 for a condo, and an inventory level of over 21,500 new units available for sale.
With prices down between 18 and 19 per cent, and inventory and choice at levels not seen in a decade, the market conditions clearly favour buyers — so why are we not seeing higher sales?
Between 2019 and 2025, the construction industry in general, and the new-home construction sector in the GTA in particular, experienced tremendous cost inflation. The cost to build a new single-family home basically doubled, while the cost to build an apartment increased by more than three quarters. Layered on this, the dollar amount of fees, taxes and charges on new homes in the region increased, particularly municipal development charges. Where higher costs meet declining prices, a price floor is reached — beyond which a project is no longer economically viable to produce.
This is important for two reasons: First, it explains why prices for new homes have remained stable at around $1.5 million for single-family homes and around $1 million for condos for the past year and a half — they are at the price floor. Second, this suggests that, although price points have declined due to a variety of factors, we are unlikely to see further declines unless structural changes are made to costs added during construction.
There is no doubt that the current trade and economic uncertainty, compounded by the geopolitical crisis, is having a chilling effect on purchasing behaviour. Potential new-home buyers who might ordinarily be in the market are choosing a “wait and see” approach. While difficult to quantify, the impact is certainly real.
The current public and political debate in Ottawa over changes to HST treatment on new homes is also cooling the market as buyers wait for clarity. The federal government has committed to applying new policy retroactively to May 27, which should provide reassurance to potential buyers. BILD and the industry continue to urge the federal government to expand its commitment to all buyers, not simply first-time buyers, and to have the reduction apply to the first $1 million and with a graduated decline to $1.5 million, realized at closing. This would have bottom-line savings for new-home buyers, and the above commitments provide reassurance to those considering buying a new home.
Finally, interest rates have decreased somewhat since the peak in 2024, and hopefully will continue with their downward trajectory, but for now they remain higher than the average from 2009-2023. When this is combined with the OSFI stress test, which requires potential buyers to qualify two per cent higher than the best rate they can negotiate with their lender, this limits buyers and the amounts that buyers can qualify for. Removing, lowering or temporarily suspending these requirements might prove beneficial at this time.
The question, “So what if sales remain low?” should be a concern for us all. New housing in the GTA is dependent on sales. Sales occur first, and at a period of time later, those sales result in housing starts and, after, a period of construction in a housing completion (new homes). New home supply is not a just-in-time product, but a pipeline that stretches over three to five years or more. A recent article by Altus Group, for BILD and the Ontario Home Builders’ Association, found that if the sales downturn continues much longer, annual housing starts in the GTA could fall by 23,000 units (or 60 per cent), $10 billion in annual construction investment could evaporate in the region, and almost 50 per cent of the residential construction and associated industry jobs are at risk, in a new-home construction drought that extends from 2027 through 2030.
Putting that into the language of someone who may be considering buying a new home in the next few years — the conditions now clearly favour buyers; waiting a few years, supply constraints could erode this window.
For regulators and policymakers, it is in everyone’s best interest to have a sustainable and predictable flow of new homes to meet the needs of Canadians and to avoid the peaks and valleys of supply. This includes considering how the costs they add to new homes interact with the cost of production and interest rates to exacerbate market volatility. Reducing the excessive level of added costs on new homes would help lessen market volatility by making sure more new projects can meet the economic viability threshold, making a greater range and supply of new homes available while also lessening buying sensitivity to interest rate changes.
Dave Wilkes is President and CEO of the Building Industry and Land Development Association (BILD), the voice of the home building, land development and professional renovation industry in the GTA. For the latest industry news and new home data, visitwww.bildgta.ca.
