Where is Toronto’s Real Estate Market Headed Over the Next Five Years?

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. Now with the intensity of the last couple of years just out of view, we can turn our focus to the next five. So let’s look at what shifts are currently taking place, and where the market might be headed in the near future.

How did we get here in the first place?

In order to paint the future real estate picture, it’s crucial to understand how we even got here in the first place. Since 2016, an increase in population has been one of the most significant impacts on property price hikes. Between interprovincial, interregional and international migrations — Toronto has seen unprecedented population growth, all while the construction of new dwellings have failed to keep pace.

Between 2016 and 2021, rapid growth at historically low interest rates and an increase in foreign investment kick-started an upward trajectory for the Canadian real estate market. Only a year later, the latter was soon counteracted by Ontario’s Non-Resident Speculation Tax (NRST) — a 15% charge on non-citizens in a move that slowed foreign investment. But ultimately, it had little effect on the impending housing boom. (The provincial government recently increased the NRST to 20% and expanded it provincewide.)

Of course, what began as an easier playing field for citizens (i.e. 5% down on a first home) became drastically more difficult when the Canadian Mortgage and Housing Corporation introduced their ‘Stress Test’ in January 2018. This forced buyers to prove they could afford a much higher mortgage rate increase than in years prior, leaving many first-time buyers out of the running, and creating a frenzy for those who just made the cut.

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.

Oh right, the pandemic…

The trends borne out of the pandemic, including the advent of ‘work from home’, the need for more space (think garage gyms) or increased amenities for condo living, pushed an already accelerating market over the top.

This shift has encouraged people to purchase everything from larger detached homes on the outskirts of the GTA to more centralized condos in the downtown core, driving up housing costs (literally) everywhere.

Now, as the pandemic winds down and with the recent announcement of a new set of rules set out by the Liberal-NDP partnership — local real estate professionals are predicting a number of positive changes.

New policies announced for real estate

“The Liberal-NDP coalition will result in new government policies 100 per cent,” says Strata.ca realtor Daniel Forte. “These will be policies that should speed up housing development to meet demand, and remove barriers to allow more people to enter the market.”

Some of those policies include:

• Extending the rapid housing initiative for an additional year
• Aiming to commit all funds as quickly as possible to ensure housing is available within 12 months of agreements, unless otherwise agreed upon
• The Housing Accelerator Fund that will help municipalities build housing more quickly
• A ‘Homebuyers Bill of Rights’ by the end of 2023

Will these new regulations impact property flipping?

While the full effect of these new measures remains to be seen — when it comes to the growing popularity of the house flip, Forte also says that “only recently have people been using real estate as a two to four year investment tool.” While it began largely with the housing market, he expects that this type of investment will shift to condos.

In particular, Forte says, “condos with reasonable fees and parking will be the properties that offer the biggest return on investment in the next five years.”

Where to? Here are the neighbourhoods to look at next

With the outlook holding steady for growth and investment, the question on everyone’s minds is: Where is demand going next?

Osman Omaid is another real estate professional at Strata.ca, who 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 explains.

Some of Omaid’s suggestions include:

• One bedroom condos in Regent Park
• One bedroom + dens in Flemingdon Park

Both neighbourhoods are flourishing in terms of new builds or added amenities currently under construction. In fact, Flemingdon Park Station is being built as part of a new transit project called The Ontario Line — which is expected to increase overall property values in the surrounding area.

In terms of the best property to purchase for that kind of gain? Forte recommends a detached home in a desirable area with frontage.

“This is generally considered the best and most desired property,” he says. “And its long-term value will not only hold but also increase, especially when it hits the 10-year milestone.”