For the longest time, it seemed like the Ontario housing market could only move in one direction. Many had come to assume that housing prices would consistently rise, and that construction activity would remain strong.
From 2021 through early 2026, however, the Ontario market moved through a dramatic cycle, shifting from a pandemic-fuelled buying frenzy to a sharp correction driven by rapidly rising interest rates. The result has been a market characterized by high inventory, weak demand and falling prices.
In 2021, average home prices in Ontario rose nearly 22 per cent, according to the Canadian Real Estate Association (CREA). Beginning in early 2022, the Bank of Canada moved aggressively to raise interest rates, triggering a steep drop in sales and a sharp repricing across the market. The initial adjustment was more pronounced in the detached home segment, but the condo market was not immune. Condo prices have continued to decline as investor demand has waned and changes to federal immigration policy have tempered demand.
While there remains an overhang of supply in the condo market, the construction pipeline has all but dried up. For years, condos played a key role in supplying the rental market, but that dynamic is shifting. A growing purpose-built rental stock, supported by federal policy, has changed the economic calculus for condo investors.
Smaller investors continue to face a price gap of roughly 20 per cent between newly constructed units and existing resale stock, limiting new investor participation.
As smaller investors step back, institutional buyers are beginning to enter the market. Funds are purchasing excess inventory from developers and investors at a discount, with a view to holding and leasing these units over the medium term.
Looking ahead, supply is expected to tighten significantly. Condo completions in the GTHA are projected to drop by 40 per cent from their annualized peak of just over 31,000 units. According to Urbanation, new supply could fall to zero by 2029, setting the stage for a potential shortage of available inventory in the market.
The broader single-family market has also faced pressure, as buyers have become increasingly cautious amid expectations of falling prices. Recent Abacus survey data provides insights into shifting buyer intentions.
According to Abacus’ report, Unlocking Homeownership: What Canadians Want from Housing Policy, the desire to own a home remains “deeply rooted in the Canadian mindset.” Among non-homeowners, 70 per cent say they still want to own a home someday.
The barrier is not a lack of interest, but of access. Importantly, the challenge is not confined to lower-income households; it affects middle-income Canadians as well. As a result, many view the issue not only as a non-market housing shortage, but also as a growing affordability crisis for would-be homebuyers.
There is also notable support for recent policy measures such as GST relief on new housing, alongside broader concerns that development charges are placing too much of the infrastructure cost burden on new homebuyers. Abacus found that 55 per cent of new homebuyers believe the removal of the GST will have at least a moderate impact on affordability. Significantly, 4 in 10 prospective buyers say the sales tax removal would make them more likely to purchase a home. This is material in the context of a market where many buyers have remained on the sidelines, awaiting more favourable conditions. While this does not necessarily translate into immediate action, it does suggest a shift in sentiment.
While I don’t expect the market to rebound quickly, there are encouraging signs that we may be nearing a turning point.
Independent Opinion
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