Metro Toronto Real Estate

Trends and Forecast

Metro Toronto, ON


  • Metro Toronto home prices are rising, and market conditions provide a negotiating advantage to sellers (not buyers).
  • The average Metro Toronto household still can not afford current house prices and unusually high increases in house prices are the greatest factor making homes unaffordable.
  • Contrary to the overall trend, high-end markets like Oakville, Richmond Hill, and Markham have experienced house price declines over the past year. This weakening at the top of the market may lead to softening in other areas.
  • The silver lining, for those betting on higher prices, is that foreign speculative investors appear to have left Western Canada and are now heavily involved in Toronto, Ottawa, and Montreal.

Even though prices are up, the number of people buying homes is down roughly 25% from 2016. Some people blame higher interest rates and tighter mortgage rules for the weaker market, but these arguments don’t hold much weight. Mortgage rates are still at rock-bottom lows and the market weakness began in 2017 when foreign buyer taxes came into effect rather than in 2018 with the introduction of the stress test. Toronto house prices have primarily weakened because foreign direct investment has shifted to Ottawa and Montreal.

Torontonians like to compare the local market to other global cities, so it is important to point out that most of Toronto’s market indicators are similar to those seen recently in San Francisco, Manhattan, Sydney, Stockholm, and London. These markets have weakened significantly and home prices have been dropping in what has been described as a synchronized global real estate slowdown.

This article covers:

  1. Where are Metro Toronto prices headed?

  2. What are Purchase and Listing Trends?

  3. Should property investors sell?

  4. Is this a good time to buy real estate?

1. Where are Metro Toronto prices headed?

Home Price Overview

The good news (for buyers) is that prices are dropping in Metro Toronto, but the not-so-good news is that prices are still beyond the reach of a median Metro Toronto household with an income of $78,000 (before taxes). There is, however, a glimmer of hope for buyers as prices continue dropping through 2019.

Metro Toronto Housing Affordability

GTA Detached House Prices

Since the peak in 2017, Metro Toronto house prices have dropped roughly $100,000.

From the beginning of 2015, Metro Toronto house prices climbed $400,000 to a peak of $1.05 million. House prices subsequently dropped $140,000 and have been relatively flat since. Metro Toronto house prices have shown a fair degree of unpredictability. Is it possible that prices may drop again between now and the end of 2020? If you’re looking to buy or sell your home in the next three years, you should pay close attention later in this article when we explore recent trends in buyer and seller behaviour.

Contrary to the flat overall house price trend, high-end markets like Oakville, Richmond Hill, and Markham have experienced house price declines over the past year. This weakening at the top of the market may lead to softening in other areas.

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Metro Toronto Townhouse and Condo Prices are Flying High

Metro Toronto condo prices skyrocketed since 2016 and continue to break new records. The bad news for first-time home buyers is that prices have outpaced any reasonable measure of affordability. At Mortgage Sandbox, we are concerned that Toronto is mirroring the 2018 Vancouver condo market which ran super-hot and has since spent over a year experiencing price drops. If the Toronto market was slow steady market, we would consider it to be a low risk.  We expect prices to decelerate in the slow winter months. Today, the benchmark Metro Toronto condo is almost affordable with help from the bank of mom and dad.

Metro Toronto townhouse prices are a blend of house and condo price trends. Since 2017, house prices have dropped while townhouse prices have remained flat and the gap between the two has narrowed. For townhouse owners seeking to upgrade to a full house, this could be a great opportunity.

Still a challenge for first-time home buyers

Although Toronto house prices have dropped significantly from the 2017 peak they are still not very affordable. Condos prices have pushed upward to levels that may not be sustainable. To put this into perspective, a first-time home buyer household earning $78,000 (the median Metro Toronto household before tax income) can only get a $320,000 mortgage. This makes it painfully obvious that to buy an entry level condo, a first-time home buyer needs to save about $200,000 cash for a down payment or receive a very generous gift from mom and dad. For most people, that’s just not on the cards.

Continued below

2020 Metro Toronto House Price Forecast

We expect 2020 to be a weak year for real estate the GTA, compared to 2017. The brunt of price drops will likely be felt by higher priced properties (i.e., more expensive neighbourhoods and detached single family houses). Condos likely won’t come out ahead by the end of the year.

In our forecasts, we’ve factored in the seasonality of real estate. Prices are a little more resilient in the first half of the year and drop in the second half. This is because traditionally, there are more buyers and fewer sellers in Spring. In late summer and fall, more homes are for sale but buyers are more scarce so sellers often drop prices to complete a sale rather than wait until the next Spring.

Given the forecasts, the current market weakness, and the increased downward price pressure, prices will likely remain flat or drop for the next few months. As well, homebuyers and homeowners shouldn’t expect much price appreciation between now and the end of 2020.

Forecast sources:

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2. What are Purchase and Listing Trends?

Metro Toronto Home Sales

Flirting with a Balanced Market

What does this mean exactly? Well, the market for all homes (detached, townhome, condo) are all trending toward a position where buyers and sellers have equal negotiating power. This means in the future buyers may be able to leverage the weaker market to negotiate discounts and incentives. The positive outcomes for buyers are stable prices, more selection, fewer bidding wars, and ultimately a little less stress.

While the condo and townhouse markets are further into seller’s advantage, the house market which makes up most of purchases has been flirting with a balanced market. So, if new construction completions later this year (Metro Toronto had 41,000 housing starts in 2018) push the market into a full-blown balanced market we could see prices discounts in late 2019-2020. Yay for first-time home buyers!

Fewer buyers – Perhaps foreign speculators are crowding out home buyers?

2019 has been another slow year for home purchases, which is certainly not something we’re used to seeing. Our research suggests that current prices are not affordable to people with local jobs regardless of how many people move to the GTA. As well, foreign buyers are beginning to shift their capital to places where their money goes further. Scanning news outlets across Canada and reviewing realtor marketing materials, it becomes clear that foreign money coming to Canada seems to have been re-directed toward Ottawa and Montreal.

The number of Metro Toronto houses sold is trending slightly below past years while the number Metro Toronto houses listed for sale has been trending a little higher than past years. These trends of lower demand and higher supply explain the softening on house prices.

In contrast, the number of Toronto condo purchases (sales) have been far lower compared to previous years and we are seeing dramatically higher active listings. Basic economic theory tells us that we can expect this to lead to condo and townhouse price reductions.

A decrease in pre-sales reflects a more disciplined market

Pre-sales, which are purchases of brand-new homes from developers, have cooled off substantially since 2017. Since developers need to sell at least 70% of a project to secure financing and begin construction, they may try to entice buyers with price discounts, move-in allowances, and cool amenities. Some developers have offered a bonus to realtors representing buyers who can convince their client to buy!

Year to Date New Home Pre-Sales, Greater Toronto Area (GTA)

The current high-rise pre-sale activity levels reflect a more normalized pace of sales for the GTA however low-rise sales activity is well below the 10-year average. The weakness of low-rise pre-sales has impacted prices significantly.

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Causes of the slowdown

At Mortgage Sandbox, we break down our market analysis to five key factors: affordability, capital flows, government policy, supply and popular sentiment. Read the full report to understand how these factors are affecting prices in Metro Toronto.

Five Forces Driving Ontario Home Prices

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3. Should Investors Sell?

From a seller’s perspective, now is a better time to sell than in two years as CMHC, a Government of Canada Agency predicts that house prices will be flat or drop for the next two years.

To benefit from the best-case scenario, a home buyer should talk to their mortgage broker about prioritizing flexible loan conditions and mitigating risk. Find out more about the benefits of a mortgage broker.

Potential for a highly supplied market

There’s potential for an overwhelming surge in supply and this would bring more downward pressure on prices.

41,000 homes were under construction in Metro Toronto (12,000 in the City of Toronto) in February 2019, which are due to complete in 2019 and 2020. If a significant number of those homes were pre-purchased with the intention to flip them, they could bring a ton of supply to the market.

4. Is this a good time to buy?

With buyer negotiating power and dropping prices, 2019 will be a good time to buy. However, 2020 may be even better.

If you are thinking of buying just be sure to drive a hard bargain and cover your bases with smart and educated decisions. Don’t bite off more than you can chew.

Buying a home is a big decision, so check out Mortgage Sandbox’s Canadian Home Buyer Guide so we can walk you through the end-to-end process and get you ready to buy your new home!

Where will mortgage rates be by 2021?

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