Fundamental Reasons Toronto’s Housing Market Will Thrive in 2025

Toronto’s already pricey housing market is a long way from Manhattan’s, though it could surpass Vancouver to become Canada’s most expensive in the coming months.

That’s according to Royal LePage President and CEO Phil Soper, based on his years of experience and fundamental market trends and tendencies. Soper noted that despite recent challenges, the fundamentals that drive housing markets have taken hold in the GTA.

As lower interest rates begin to spur activity in other parts of Canada, Soper believes Toronto’s real estate sector is poised for a wild 2025.

“Toronto is still a heck of a bargain compared to the New York metro area, let alone Manhattan; it’s tough, it’s expensive, we’ve had a really unusual period in the Canadian housing market over the last 26 months, but home prices haven’t gone up while wages, salaries, and savings have gone up,” he says. “Places like Halifax, Montreal, and Calgary started recovering months ago, and the last markets to bounce back from this post-pandemic recession will be Toronto and Vancouver.”

In the short term, Soper says, falling interest rates will kickstart Toronto’s next housing boom; one that will see the city take Vancouver’s crown as the most expensive market in the country.

In the long term, Soper says, relatively high incomes, immigration, and interest in home ownership will allow Canada to maintain the highest home ownership rates among the G20 countries, even if some homes are more expensive than Toronto.

Why has Canada’s housing market boomed for so long?

Basically, to be successful in real estate, you need growing demand and the ability of people to pay for it. South Korea, for example, has a successful economy, but their fertility rate is 0.7, so their population is shrinking, and they don’t have a functioning immigration system. Last year, our birth rate dropped to 1.26, which is not bad for an advanced economy, but we also had a robust immigration system, and over 60 percent are economic immigrants — they come with skills or because they are entrepreneurs with capital — compared to about 25 percent in the United States.

I know Canada has recently backed off on its immigration goals, but whoever is in Ottawa, in a few years we will be back on the immigration bandwagon again because we have an aging population and because we have the cultural and governmental infrastructure to make it work.

Why does the housing market seem broken?

Well, partly because it is. Canada’s housing crisis is the same as the United States, Australia, Germany, and developed countries around the world. We have been underbuilding for years relative to organic need — let alone immigration-driven need, but there are other subtleties that complicate the picture.

For example, in my grandparents’ day, the average detached home in Canada had six people living in it; when I was a kid, it was four; today, it’s 2.1, and one of the fastest-growing sub-segments in the housing industry is homeowners in their 20s and 30s. That means we should have doubled the number of one- and two-person units we had in the 1960s, but planners didn’t see that coming. We’re also building slower to accommodate much-needed environmental assessments, density goals, transportation needs, etc. In 2022, it took an average of 650 days to get approval for a 500-unit condo, which is a long time, but it also took an average of 500 days to get approval for a three- to 500-unit condo. In 1995, it took 10 months to build a detached home; in 2024, it’s 25 months. The cost to build such a home has also increased by 110% since 2018 in Toronto.

We are seriously behind on the housing we need, but demand has been masked by the slowdown since the pandemic. It will come back full steam ahead next year, and we will again be talking about uncomfortably large increases in housing prices.