As we close out 2024, the housing market in the Greater Toronto Area stands at a crossroads.
The first half of 2025 will present a time-limited sweet spot that offers favourable conditions to homebuyers. The next six months will also be a crucial time for government decision-makers, as they must take steps to address the long-term structural challenges plaguing the market.
Failure to do so will have dire consequences for the future of housing supply in the region.
For those considering purchasing a new home, there are several positive factors that have created a short-term (and therefore limited) buying opportunity.
New home prices have fallen by 15 to 18 per cent (since the previous peak in 2022) and existing inventory has increased.
Choice is better than it has been any time in the last decade so there is a unique window of opportunity for those looking to secure a new home.
As interest rates ease, monthly mortgage payments will become more manageable, further opening the door to more buyers entering the market.
Additionally, the upcoming changes to mortgage rules, including a 30-year amortization period, should make home ownership more accessible, especially for first-time buyers. With these changes happening, this is a great time for new homebuyers to enter the market.
However, this positive start to 2025 cannot and should not mask the significant challenges our market and region will face in the months and years ahead.
In 2024, we witnessed the weakest sales in new homes and condominiums since the mid-1990s. This was on top of a very weak 2023. For context, in the past year home sales in the GTA were about 75 per cent below the 10-year average, with the City of Toronto particularly hard-hit.
While single-family homes in the 905 areas have performed somewhat better, the overall market has seen an unprecedented slowdown.
The combination of high interest rates, inflated construction costs, untenable government fees and taxes, and persistent delays in project approvals has stalled new housing.
By 2027-2028, this lack of sales will translate into a significant lack of housing starts, a decline already being tracked by Canadian Mortgage and Housing Corp. data.
Combine this pending shortage with the fact that the population in the GTA is forecast to continue growing rapidly, along with lower interest rates allowing those on the sidelines to re-enter the market: demand will resurface and the impacts of lower starts will begin to be felt.
We can expect, at some point next year, more buyers chasing fewer new homes — and as a result it is not a question of whether prices will rise, but by how much.
The consequences of these conditions are predictable and have resulted in a bright red flashing “check engine” warning light on the dashboard of the region’s housing market.
And while a check engine light is always cause for concern, what provides reassurance is the diagnosis of the problem is readily apparent.
The cost to build the types of new homes the market is demanding is simply too high. Projects of all types — lowrise, highrise and purpose-built rental — are not moving forward because the economics just don’t add up.
In 2024, we saw the beginning of necessary steps by municipalities like Vaughan and Burlington (and, to a limited extent, the City of Toronto) to lower the cost to build by adjusting development charges. This leadership must be immediately embraced and expanded on by municipalities throughout the region.
Last year also saw several other key steps forward. Increased investment by the provincial and federal governments to support infrastructure for long-term growth, the designation of areas for expansion across the Greater Golden Horseshoe, and the identification of existing land to accommodate increased density, to name a few.
This includes increased densities along major avenues in Toronto proper and a provincial commitment to maintain the ability to convert certain employment zones into residential areas.
As I look ahead to 2025, I see two opportunities. First, the upcoming six months will provide an opportunity for new home buyers, with more supply, lower prices (as compared to the market peak) and lower interest rates.
The second opportunity is one where the answer is waiting to be defined. Will we look back at 2025 and remember it as the time governments finally made the choices needed to address the structural challenges facing the housing market?
Or will it be yet another example of where decision-makers missed the warning signs and the opportunity for change?
Now is the time to speak up and demand that governments take steps to lower the cost to build, expedite approvals, invest in infrastructure and designate areas for increased density and growth. Our regions’ future is at stake.
Our industry will continue to advocate on behalf of owners of new homes and work with governments to seize this opportunity to take decisive action and build more housing for our growing region.
