Toronto Real Estate: Year in Review & Market Outlook for 2025
In Toronto’s emotionally reactive real estate market, sentiment and confidence remain powerful drivers of value. These psychological factors, often underestimated, have had a significant impact, as continued socio-economic, political, and environmental disruptions have both confused and exhausted the market, inhibiting sales activity. Despite this instability, we continue to recognize trends, particularly the weakness of the condo sector and relative stability in purpose-built rentals. Our guidance for this year will be familiar: seek value and minimize risk. In fact, this has always been our ethos.
Our approach remains consistent: seek value and minimize risk
As predicted, new listings outpaced sales throughout much of 2024. Sales activity saw a slight uptick of 2.6%, while new listings surged by 16.4% year over year. This sustained oversupply provided buyers with lots to choose from – particularly in the condo segment — and functioned as a release-valve for what little pressure remained.
First-time buyers were cautious, while experienced buyers with equity were more willing to transact. Investors with smaller portfolios conserved cash, whereas active investors recognized opportunities to pursue more aggressive deals. With many brokerages predicting a “return to growth,” such optimism, in our view, may be premature. Opportunities still exist, but they are increasingly harder to find.
Shifting Focus: The Changing Landscape of Toronto Real Estate Investment
A paradigm shift among investors is being felt across the market, both in the condo and single-family segments.
For many years, investors were competing with end-users, eagerly awaiting the launch of a new condo development, often purchasing multiple suites with the expectation that, by closing, they would have already made a decent profit. Now, however, short-term value appreciation and stable cash flow are no longer as reliable as they once were. With rising costs, and downward pressure on lease rates and re-sale values, investors are actively trying to unload their under-performing assets.
By January 2025, condo listings had increased by 46% compared to the previous year, underscoring the oversaturation of the market. Purchasing a condo unit as a short-term investment is no longer a viable strategy. Realizing value appreciation on these assets requires long-term ownership or intergenerational transfer. Similarly, with single-family homes/townhomes, values have largely plateaued across the city. The strategy of “buy and flip” is now “buy and hold.” With housing and sustainability becoming central themes in policymaking, we advise a strategic pivot toward purpose-built rentals and higher-density multi-family properties.
Staying on Track: Focused, Informed Strategies
Our investment philosophy remains grounded in one key principle: prioritize features that objectively add value while avoiding those that detract from it. While investors may not always prioritize emotional appeal, identifying properties that possess objective value adds is essential. Unique architecture, period details, efficient and inspired use of space, and prime location are all critical factors that contribute to a property’s lasting value, regardless of its size or function. By prioritizing these essential characteristics, you can secure investments that will endure and thrive, even in an unpredictable market.
Failure to recognize and invest based on these features results in what is currently playing itself out in the condo market: lots of hastily constructed, poorly designed units, that all look the same and lack any inherent value — buyers simply don’t believe in the value anymore. As investors exit the condo market, many of these units will be purchased by end-user buyers who will live in them.
The days of “condo as investment” are gone
For a city like Toronto, that saw approximately 60% of its condo units owned by investors, this is a true paradigm shift that will take time to play itself out. With that in mind, it is our assessment that the days of “condo as investment” are largely behind us. If you are determined to acquire a condo investment, we recommend a larger space, ideally something within a coveted building, with a unique floorplan. Hard loft conversions hold value, as do boutique buildings anchored by desirable neighbourhoods.
If you’re purchasing a single-family home, similar rules apply. Look for spaces that are exciting, and unique, but functional and comfortable, within neighbourhoods or areas that are sought after and evolving in a positive way.
Over the past few years our team (and our clients) have had great success converting single family spaces into multi-residential properties. We believe this is a positive step forward for the future of Toronto housing. As investors we are uniquely positioned to create communities that promote sustainability, inclusivity, and innovation. We can use this natural inflection point to re-position in a thoughtful and strategic way.
The Rental Market
There was an expectation that lower interest rates would stimulate condo re-sale activity. Unfortunately, that has not yet materialized. Improved affordability has, however, made it easier for investors to hold onto their unsold units, and instead, adding them back into the rental market. With softer population inflows expected in 2025, and a glut of newly developed towers scattered across the downtown corridor, we expect to see a continued slowdown on the increase of average rents across the city. Like buyers, tenants now have more to choose from.
Our leasing team have confirmed that if a unit is even $50.00 over-priced, it will sit for up to three months, or, until it adjusts down to meet the market. What we have seen in many of these new buildings is simply a race to the bottom – with some buildings having thirty or more units available for rent, investors compete directly with one another; whoever’s unit is the most affordable, wins.
Looking Ahead: Stability Amid Uncertainty in the Toronto Real Estate Market
The sales-to-new-listings ratio, a key metric for us, currently holds steady at around 39%, reflecting a 9% increase—a possible light at the end of the tunnel. Toronto remains a buyer’s market with plenty of unsold inventory dragging down prices. Properties that can elicit an emotional response from buyers continue to perform well, making these “trophy” assets a priority for investors looking to expand their portfolios.
2025 promises to be another interesting and potentially turbulent year. Any shockwaves, whether real or perceived, could erode (or eliminate) the market’s cautious optimism. We expect both buyers and sellers to continue to exercise restraint, which will reflect itself in modest to flat growth throughout the year.
With our extensive real estate and property management experience across nearly every GTA postal code, we are uniquely positioned to monitor and respond to emerging market trends. Our portfolio serves as a real-time indicator of broader trends, allowing us to respond and react quickly.
Final Thoughts: Adapting for Long-Term Success
As we look ahead, it’s clear that the Toronto real estate market has yet to find its soft landing. Whatever your investment objectives may be, adaptability is crucial.
The landscape may be changing, but with the right approach, there are still opportunities to build wealth and secure long-term success. As always we remain here to guide you through these changes with expertise, insight, and a data-driven approach.
For more real estate data visit the Toronto Regional Real Estate Board.
