Toronto Real Estate Market: Lessons From an Unstable Period

Forecasting market dynamics is easiest during stable times. Yet prescient strategizing has been complicated by the pandemic. In the context of 2021’s real estate market outlook, we remain focused on understanding how and why our city and its real estate market have adapted. Over the past year, we have navigated both challenges and opportunities created by this prolonged period of uncertainty. Making sense of rapid change is not easy, especially during a global health crisis.

Below, we share our key observations and strategies to help you plan for the year ahead.

Divergent Markets Emerging After COVID Shock

In March 2020, uncertainty and fear stalled activity. By May, once the initial shock faded, some investors spotted an opportunity and listed their properties early. Others acted quickly, making aggressive offers to anxious sellers looking to exit. This frenzied trading of low-rise, single-family, and multi-residential homes kept inventory low and fueled fast, competitive negotiations, aligning with the real estate outlook for 2021.

The delayed spring market rolled into summer with no usual post–Labour Day slowdown.

The Downtown Condo Slowdown

A fault line we had been monitoring began to widen in the condo market. At the time, one in three Toronto condos belonged to investors. Many bought at premium prices and relied on record-high lease rates to cover carrying costs.

As tenants left the downtown core, vacancies surged. By September, condo listings for both rent and sale flooded the market. Demand collapsed and the strong growth condo owners had enjoyed disappeared almost overnight.

Vacancies peaked in November 2020. While absorption improved into Q2 2021, lease rates in some areas dropped by as much as 20% even as condo fees and property taxes climbed, reflecting part of the real estate market outlook for 2021.

Aggressive Buying in Low-Rise and Suburban Markets

At the same time, low interest rates, reduced consumer debt, and a persistent “fear of missing out” pushed buyers back into the market. Many competed aggressively for detached, semi-detached, and suburban homes, driving prices higher across Toronto and the GTA.

Shifting Buyer Preferences: Space and Privacy

Lockdowns reshaped what people value in a home. Comfort, security, and room to grow became top priorities.

City living felt less essential — and even unhealthy — to many. Micro-condos lost appeal while suburbs and cottage-country properties gained attention. Some buyers even purchased vacant land to build remote work–friendly homes. Given this, the 2021 real estate market outlook shows a growing preference for more spacious living environments.

Low interest rates and government supports gave many the confidence to buy, as long as it wasn’t a 450-square-foot downtown condo.

Strategy for Sellers

If you own a detached, semi-detached, or townhome, today’s unique market pressure may allow you to sell for a premium. However, you need a thoughtful strategy.

Currently, the Landlord & Tenant Board (LTB) handles only emergency matters. No escalation process exists for standard disputes, access issues, or evictions. A single misstep with tenants could derail a sale and cost hundreds of thousands.

Strategy for Condo Investors

If you own a unique, well-positioned condo, expect relative stability. We see no significant headwinds for thoughtfully designed, well-built inventory.

Owners of small, conventional condos should focus on maintaining cash flow until demand returns downtown. The recovery will align with the reopening of campuses and offices, eventuating part of the real estate market outlook expectations for 2021.

Tenancy Management Challenges

As noted, the LTB remains closed to most non-emergency issues, and there is a temporary moratorium on evictions. Tenants know their rights and understand landlords face legal barriers when selling or regaining possession.

Our Approach to Tenant Relations

Our integrated property management and real estate services make transitions easier.

  • We know your tenants personally, treat them with respect, and maintain trust.
  • We explain their rights clearly and work to reduce stress during moves or sales.
  • We also ensure every agreement follows the Residential Tenancies Act to avoid costly legal missteps.

Competitive Buying and Market Frenzy

Many current home sales happen within hours, often hundreds of thousands over asking. Easily accessed credit and weak housing policy have fueled this aggressive — and sometimes reckless — buying wave. In reflecting on the real estate market outlook for 2021, we caution clients not to get swept up in the frenzy. Some purchases made in today’s climate may be difficult to resell later.

Our Advice to Buyers

We help both investors and families purchase wisely. Real estate should always be treated as an investment.

Set a firm budget before entering a bidding war. Understand what a property is truly worth and when to walk away.

Toronto has experienced these frenzied cycles before, including in 2017. Stimulus money and lockdown fatigue are pushing buyers forward, but today’s rapid price increases may not hold long term, a key consideration in the 2021 market outlook.

Final Thoughts

If you’re considering a sale, the spring market has arrived — but careful strategy is crucial. We’re here to help you navigate volatile conditions and make informed, profitable decisions.

For current mortgage trends and policy updates, visit the Bank of Canada interest rate page.