Sean's Market Insight Volume #13
Sean Zahedi
Executive Sales & Marketing Strategist - New Developments/ Philanthropist / Columnist/ Speaker
Q1-2025: Toronto Real Estate at a Tipping Point—What to Expet
As 2025 unfolds, Toronto's real estate market is experiencing significant shifts across both the resale and preconstruction sectors. From a resale market rebound to the emergence of boutique condo living, and from policy-driven uncertainty to the impact of rising construction costs, multiple factors are shaping the market’s trajectory.
Resale Market: A Promising Start to 2025, But Will It Last?
The Toronto resale market kicked off 2025 with a notable 10% rebound in home sales, totaling 5,971 transactions in January. This recovery follows a steep 18.2% decline in December 2024, offering a much-needed boost for both buyers and sellers. However, sales remain 10.7% lower year-over-year, indicating that market confidence is still fragile.
One key factor driving this early-year activity is the Bank of Canada’s decision to lower its benchmark interest rate to 3%, which has helped ease borrowing costs. At the same time, new listings surged by 48.6% year-over-year, providing more options for buyers and reducing some of the bidding war intensity seen in previous years.
Despite the rise in sales, home prices have remained relatively flat. The MLS Home Price Index recorded a 0.7% year-over-year increase, with the average home price in Toronto sitting at $1,089,300. This suggests that while demand is picking up, buyers remain cautious, waiting for potential further rate cuts or market corrections later in the year.
With spring around the corner, the market is at a crossroads. Will this momentum carry forward into the busy season, or is this just a temporary uptick before another slowdown?
Boutique Condo Living Gains Momentum Among Affluent Buyers
As investor-driven preconstruction projects struggle to gain traction, a new trend is emerging: luxury boutique condo living. Toronto’s affluent downsizers and end-users are gravitating toward low-density, high-end developments that offer exclusivity, spacious layouts, and premium finishes.
Leading this movement is "The Chatsworth" by Times Group , located in the prestigious Lawrence Park neighborhood. Unlike high-density towers, The Chatsworth features generously sized suites with a focus on privacy, craftsmanship, and livability—a perfect fit for homeowners transitioning from large detached properties.
Other notable boutique condo projects reshaping Toronto’s luxury market include "2 Post Road," "7 Dale," "10 Prince Arthur," "One Roxborough," and "The Bedford." These developments cater to a growing segment of buyers who prioritize quality over quantity, offering custom-designed residences in Toronto’s most desirable neighborhoods.
With demand for spacious, high-end residences continuing to rise, could boutique luxury condominiums become the dominant force in Toronto’s real estate market over the next decade?
U.S. Trade Policies and Their Ripple Effect on Canadian Real Estate
Changes in U.S. trade policies are beginning to impact Canada’s real estate sector, particularly in construction costs and investment trends. Recently implemented tariffs on Canadian exports, including lumber and steel, are raising material costs, making new construction more expensive.
For instance, the price of lumber—an essential component in residential construction—has fluctuated significantly in recent months, adding uncertainty for developers. Meanwhile, higher U.S. interest rates are pushing global investors to favor American real estate over Canadian assets, potentially slowing foreign capital inflows into Toronto’s condo market.
Additionally, U.S. banking regulations are influencing mortgage rates in Canada. As American banks tighten lending policies, Canadian financial institutions may adjust their mortgage strategies, affecting affordability for buyers.
With these external pressures mounting, will cross-border trade policies further strain Toronto’s housing market, or will developers and investors find ways to adapt?
Construction Costs and Development Slowdown: What It Means for Supply
While some building material prices have stabilized, overall construction costs remain a significant challenge for Toronto developers. Labor shortages, increased municipal fees, and high interest rates continue to push expenses higher, forcing some projects to delay or even cancel their launches.
In 2024, the average cost to build a new condominium in Toronto rose by 15%, with labor costs alone increasing by 10% year-over-year. As a result, many developers are re-evaluating their preconstruction strategies, opting to delay launches rather than risk slow sales and financial losses.
The consequence? A supply crunch in the coming years. If fewer projects break ground in 2025 and 2026, the city could face an even greater housing shortage by 2027, pushing resale prices higher.
Can government intervention or more efficient construction methods help ease this bottleneck, or is Toronto heading toward an even more severe housing affordability crisis?
Ontario’s Upcoming Election and the Uncertainty Around Housing Policy
As Ontario gears up for its provincial election in 2025, real estate and housing policy have become top voter concerns. The outcome of this election could drastically alter development policies, rental regulations, and government-backed affordability programs.
Key areas under debate include:
With policy uncertainty looming, developers, investors, and buyers are in a holding pattern, waiting to see which direction Ontario’s housing strategy will take post-election.
Will new leadership accelerate development and affordability measures, or will the real estate market face further constraints and volatility?
Preconstruction Market: Developers Rethink Strategies Amid High Inventory Levels
The preconstruction condo sector in Toronto remains in a precarious position. In 2024, new home sales dropped 47.3% year-over-year, reaching their lowest levels since 1990. As of December 2024, 21,787 unsold units remain on the market, leaving developers to rethink their strategies.
To adapt, many are:
Despite these adjustments, buyer confidence remains low, with many waiting for further price corrections or interest rate cuts before committing to preconstruction purchases.
The next few months will be critical in determining whether preconstruction demand can recover, or if developers will continue to pull back on new launches, worsening Toronto’s long-term supply issues.
Final Thoughts: A Market in Transition
Toronto’s real estate market is undergoing a significant transformation in 2025. While resale activity is rebounding, the preconstruction sector faces serious hurdles. The rise of boutique luxury condos signals a shift in buyer preferences, while trade policies, construction costs, and election-driven uncertainty create additional complexities.
With so many moving pieces, the second quarter of 2025 will be a defining period for Toronto real estate. Will rate cuts and policy shifts help stabilize the market, or are we on the brink of a more prolonged correction?
One thing is certain: adaptability will be key for buyers, investors, and developers alike.
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