The Great Divide in the GTA Housing Market

The spring housing market in the Greater Toronto Area (GTA) hasn’t just been a bit sluggish, it’s split in two. As highlighted in the Canada Mortgage and Housing Corporation’s (CMHC’s) recent Housing Market Outlook, residential real estate in the GTA isn’t moving as a single market anymore. Instead, we’re seeing a clear divergence, with condominiums and traditional homes on very different trajectories for the next couple of years.

At its heart, this divergence stems from a fundamental mismatch: a condominium market heavily geared towards investors struggles to meet the needs of families looking for homes with multiple bedrooms. This investor focus, evident in the prevalence of smaller units (well over half are one-bedroom or studio units),¹ channels family buyers towards traditional homes like detached houses, semidetached houses, and townhouses. The result is demand pressure and price resilience in the traditional home segment, even as the condo market faces headwinds.

Understanding this divergence is important for homeowners developing a strategy for managing their home equity in uncertain times.

The Great Divide: Deconstructing the GTA’s Bifurcating Market

In this section, we map out the key factors driving this split, exploring why the condo market is facing headwinds while traditional homes retain their value better amidst a general worsening of the economic climate. We look at the factors that the CMHC identifies in its report, including investor behaviour and supply dynamics, as well as other market fundamentals that have received less attention, such as the mismatch between what’s being built and what many buyers actually need.

1. The Condo Conundrum: Headwinds and Mismatched Supply

The GTA condo market is facing several challenges simultaneously, from investor retreats and a surge in supply to new project hurdles and a fundamental structural mismatch in the types of units being built.

Investor Retreat: The financial strain now being experienced by GTA condo investors is causing some existing investors to exit the market and discouraging some new investors from buying into it. In recent years, 4 out of every 5 leveraged investors (those with mortgages) closing on newly completed GTA condos were cash-flow negative, meaning their rental income did not cover ownership costs (mortgage, condo fees, property taxes, etc.), by $600 per month on average.² The underlying cause is the growing gap between rising costs and rent growth: average ownership costs surged by 21% in 2023 while average rents increased by only 8%.³

Supply Surge: The GTA condo market is currently grappling with absorbing a substantial wave of new units precisely when demand is softening. CMHC forecasts higher levels of new condominium apartment completions in 2025 and 2026 across the GTA.⁴ This surge will add to the existing inventory overhang. Based on March 2025 sales data, there is now 6+ months of inventory of condo apartments in Toronto,⁵  already heading into buyer’s market territory before this new wave of completions hits fully.

Predictably, this supply glut is putting downward pressure on prices. The average selling price for a condo in the GTA was down 2.6% year-over-year in March 2025.⁶ TD Economics predicts GTA condo prices will fall 15-20% from their Q3 2023 peak by the end of 2025, with 10 percentage points of that drop (i.e., half to two-thirds) happening in 2025.⁷

New Project Hurdles: The factors dampening the resale and rental condo markets are simultaneously choking off the pipeline for future supply. CMHC expects new condo apartment starts to decline significantly.⁸ Securing financing for new development projects is becoming increasingly difficult for developers. Pre-sales have plummeted to under 50%, a 20-year low.⁹ This decline, combined with low investor interest, rising unsold inventory and higher interest rates, creates significant financial hurdles. Recent data confirms this trend: actual GTA housing starts plunged 68% year-over-year in February 2025 and 65% year-over-year in March 2025,¹⁰ with the multi-unit segment (predominantly condos) being the primary driver of the decline. Industry groups like the Building Industry and Land Development Association have described new home sales hitting “rock bottom levels”, particularly in the condo sector (sales down 62% year-over-year and 90% below the 10-year average in February 2025), and warn of a potential “‘cost to build’ crisis” that could severely curtail future construction.¹¹ The number of condo projects under construction has already seen a notable reduction since 2022.¹²

The Structural Mismatch: Large commitments to build new homes and figures tracking total housing supply often feature prominently in headlines, but the mix of housing being built is equally important as the overall number. In the GTA condo market, the majority of existing and new stock consists of smaller, investor-ready units, like one-bedroom and studio apartments.¹³ This monoculture of small units does not meet the needs of families looking for more space, making these units poor substitutes for traditional houses. Solving this structural mismatch requires addressing the mix of housing being built, not just increasing the total of new builds. For example, even doubling condo starts without a shift towards larger units suitable for families will likely not solve the housing crunch for this demographic, as they will continue to be driven toward traditional homes.

2. Traditional Home Resilience: Driven by Family Demand, Evolving Land Use and Scarcity

In contrast, the market for traditional family homes shows greater resilience than the GTA condo market. For example, while the average price in the Toronto condo market was down -1.8% year-over-year this spring, the average prices of detached and semi-detached homes in Toronto were up 1.1% and 2.6%, respectively, over the same period.¹⁴ This enduring strength is not a random occurrence – it arises from the confluence of fundamental demand, evolving land use potential and severe supply constraints.

Strong Family Demand: The foundational strength of traditional home values in the GTA is rooted in the consistent, needs-based demand from families seeking appropriate living spaces. This demand is shaped by ongoing demographic shifts and changing preferences influenced by contemporary work arrangements. The demographic shift is so pronounced that the Missing Middle Initiative (University of Ottawa) now estimates that for every GTA homeowner no longer needing a family-sized home, two younger homebuyers are entering the market for one.¹⁵ Demand for family-sized homes (3+ bedrooms) is so strong that the Missing Middle Initiative identifies it as the key reason why the GTA is seeing net domestic migration out of the GTA of 80,000 people per year in recent years.¹⁶ Essentially, there are 80,000 more people leaving the GTA each year for the rest of Canada than people from the rest of Canada moving to the GTA, and a large portion of them are young families looking for adequate and affordable housing. Over the next three decades, the population of the GTA is expected to grow by over 40%, from 7.4 million in 2023 to 10.4 million in 2051.¹⁷ This significant growth will further boost demand for housing over the coming years.

New Competing Land Uses: The enduring appeal of traditional detached and semi-detached homes in the Greater Toronto Area is now amplified by the potential for converting single-family homes into multi-unit properties, often referred to as ’gentle density’. Recent zoning reforms, like Toronto’s Expanding Housing Options in Neighbourhoods (EHON) initiative,¹⁸ now permit multiplexes (such as duplexes, triplexes, or fourplexes) on many lots previously restricted to single-family homes, introducing a significant new value proposition. This potential for higher-density use means traditional homes attract not only traditional homebuyers but also developers, investors and a new generation of ’citizen developers’ eyeing the increased rental income or resale value from multiple units. The demand from developers and investors adds to competition for the limited supply of traditional homes. This dynamic further supports their market value, recognizing the land’s increasing potential for higher-density development alongside its residential use.

Supply Constraints Create Scarcity: The Missing Middle Initiative estimates that 30,000 traditional homes must be built every year to meet demand but only 10,000 are being built.¹⁹ Building new traditional homes in the GTA is difficult and expensive. Limited land (especially in Toronto), costly development charges averaging $125,000 for a single-family house, and planning policies often favouring density make it challenging.²⁰ While interest rates have eased from their peaks, higher borrowing costs have a lagged impact, which is now being seen in weaker starts as developers pause projects that are no longer financially viable.²¹ It is then unsurprising that CMHC forecasts only 4,100 to 5,300 new single-detached starts in the GTA for 2025 – certainly not enough to meet demand and 16-35% lower than in 2022.²²

Managing Your Home Equity in Uncertain Times

Life happens and sometimes you need to use the equity trapped in your home for things like renovations, helping kids with down payments, debt consolidation and retirement planning. Accessing that equity can feel challenging, especially amid the uncertainty of a two-track housing market and with a large wave of homeowners facing mortgage renewals in 2025 and 2026 at potentially much higher rates. For those considering a HELOC or second mortgage to access their home equity, the upcoming renewal on their first mortgage could squeeze their household budget, leaving little left for monthly payments on another debt product.

A Debt-Free Option: Clay Financial’s Home Equity Sharing Agreement (HESA)

This is why exploring alternative ways to access your equity becomes crucial. Our Home Equity Sharing Agreement (HESA) provides a way to tap into your home’s value without taking on new debt or monthly payments. You receive a lump sum payment today in exchange for sharing a portion of your home’s future value when you sell.

• For Owners of Traditional Homes: If you own a property benefiting from the current scarcity of and demand for traditional homes, a HESA allows you to strategically unlock some of that value for your current needs without increasing your debt load during uncertain economic times.
• A Thought for Condo Owners: If you own a condo and are concerned about the further fall in prices forecasted by CMHC, TD Economics and others, you could access some equity now with a HESA at your home’s current value. If you think you may want to access some of your equity soon, this strategy locks in your home’s current value and removes the risk of your equity decreasing in value before you tap into it.

A HESA provides financial flexibility, allowing homeowners to access funds based on life events rather than trying to time the market. It also avoids the burden of added monthly payments, regardless of future economic conditions or income changes.

Conclusion: Making Informed Choices about Home Equity

The GTA housing market is complex and no one can predict exactly how it will move and evolve over the coming years. The clear divergence between condos and traditional homes, driven by distinct supply and demand factors, means homeowners need tailored strategies for their largest assets – their homes. Understanding these trends empowers you to make informed decisions about how you manage your home equity to work for you. In an environment where flexibility and managing debt are crucial, innovative solutions like Clay Financial’s HESA offer a valuable alternative, providing access to your hard-earned equity without the traditional strings attached. Is a HESA the right fit for your goals and property type in today’s unique market? Explore your options and learn more about how a HESA from Clay Financial works.

1. Units built in mid- and high-rise buildings in Toronto that are one bedroom or smaller were 53.1% over 2001-2010 and 60.3% over 2011-2021 based on analysis by the City of Toronto. ↩︎
2. Based on analysis by Urbanation and CIBC Economics in their GTA Condo Investment Report (July 2024): 77% of leveraged investors closing on newly completed GTA condos were cash-flow negative in 2023 (rising to 81% in the first half of 2024) by $597 per month on average (significantly higher than the $223 deficit faced by investors closing in 2022 and in stark contrast to the average positive cash flows in 2020 and 2021). ↩︎
3. See footnote 2. ↩︎
4. Based on analysis by CMHC in its Housing Market Outlook (February 2025). ↩︎
5. Based on data from TRREB in its Market Watch (March 2025). ↩︎
6. See footnote 5. ↩︎
7. Based on analysis by TD Economics in its GTA Condo Market Outlook (May 2025). ↩︎
8. See footnote 4. ↩︎
9. See footnote 4. ↩︎
10. Based on housing starts data from CMHC (April 2025). ↩︎
11. Based on data and analysis by Altus Group and commentary from BILD (March 2025). ↩︎
12. See footnote 2. ↩︎
13. See footnote 1. ↩︎
14. See footnote 4. ↩︎
15. Based on research and analysis by the Missing Middle Initiative (March 2024). ↩︎
16. See footnote 15. ↩︎
17. Based on forecasts by the Government of Ontario. ↩︎
18. See EHON by the City of Toronto. ↩︎
19. See footnote 15. ↩︎
20. Based on research and analysis by Altus Group (September 2024). ↩︎
21. See footnote 4. ↩︎
22. See footnote 4. ↩︎