The COVID-19 pandemic has been the root of significant shifts in Toronto’s housing market for the past two years, from altering buyer preferences to stirring migration in and around the Greater Toronto Area.
As the market cools off from 2021’s record-breaking price and sales levels, real estate experts are now taking stock of where the Toronto market could be heading in the next five years, and the outlook appears generally positive.
In a new blog post, Robert Van Rhijn, founder of Strata.ca and the broker of record at Slate Realty, examined the shifts currently taking place in Toronto real estate, and where the housing market might be headed in the near future. He noted that “local real estate professionals are predicting a number of positive changes,” given the recent NDP-Liberal agreement and the wind down of the pandemic.
“For Toronto and the GTA, the past five years have seen seismic shifts in the local economy — including a (seemingly) never-ending boom in real estate,” he said. “Now with the intensity of the last couple of years just out of view, we can turn our focus to the next five.”
Population growth and pandemic supported current market conditions
To lay the groundwork for where the Toronto housing market will be in five years, there are a number of factors to consider.
Since 2016, Van Rhijn explained that a rising population has played a role in hiking real estate prices. Toronto has seen substantial population growth as a result of interprovincial, interregional and international migration, but building new homes to keep pace with this increase has failed.
In 2018, the Canadian Mortgage and Housing Corporation (CMHC) introduced the stress test. As this required buyers to prove they could afford a higher interest rate, it knocked first-time buyers from the running, “creating a frenzy for those who just made the cut.”
Low interest rates and heightened foreign investment between 2016 and 2021 helped to kick off an “upward trajectory for the Canadian real estate market.” Even though Ontario passed a 15 per cent Non-Resident Speculation Tax (NRST) — which has since been increased to 20 per cent and expanded across the province — Van Rhijn said that this had little effect on cooling the market’s boom.
“While these moves may have levelled the playing field for a time, most proved largely insignificant in the wake of the pandemic in early 2020,” he said.
Once COVID-19 arrived in March 2020, trends created out of the pandemic added fuel to the hot housing market. Many homebuyers who were now working and schooling from home needed more space, heightening market demand. Purchasers scooped up larger detached homes on the fringes of the GTA and more centralized downtown condos, pushing up the cost of housing.
Property investment, federal policies to shape housing for next five years
As the pandemic fades and new federal housing policies become more concrete, Van Rhijn explains that local professionals foresee positive changes for real estate.
Last month, the federal Liberal and NDP parties came to a supply and confidence agreement on common policy objectives. Some of these mutual goals include launching the Housing Accelerator Fund, implementing a Homebuyers’ Bill of Rights by the end of 2023 and extending the rapid housing initiative for an additional year, to name a few.
“These will be policies that should speed up housing development to meet demand, and remove barriers to allow more people to enter the market,” said Strata.ca realtor Daniel Forte in the post.
When it comes to house flipping, Forte added that people have only recently been using real estate as a two- to four-year investment tool, and this type of investment will shift towards condos. Units that offer reasonable fees and parking will lend the biggest return on investment in the next five years.
In terms of market demand, Osman Omaid, a fellow Strata.ca realtor, believes specific condo types will yield the highest return on investment.
“A reasonably priced one bedroom or one bedroom plus den in up-and-coming neighbourhoods will offer great appreciation between 2025 and 2030,” he said. This includes one-bedroom condos in Regent Park, and one-bedroom-plus-den units in Flemingdon Park, which are seeing high levels of new builds or added amenities.
