My 2025 Forecast for Toronto Freehold Starter Homes

Justin Trudeau spent years saying that more housing supply would bring prices down and cool the market. What actually happened is that the average price of a home in Canada roughly doubled from 2015 to now. With Trudeau stepping down as Liberal leader, the question is whether 2025 finally brings more homes to the GTA.

I am Moe Asgarian, senior real estate advisor in Toronto, ranked #47 worldwide at RE/MAX. My answer is that the freehold supply problem is not getting solved this year, and I have five predictions to explain why. Just so we are clear, this is about freehold houses, not condos, and specifically about starter homes: three-bedroom houses in the roughly $900,000 to $1.3 million range.

The promise nobody kept

Canada once aimed to build 550,000 new homes a year, and the hope was that this would push prices down. Neither happened. The country managed to start about 236,000 homes, roughly half of what was promised. In Ontario, the most populous province, only 20,000 permits were issued for single-family homes. So forget the 550,000 figure and let us look at what this market actually does now.

Starter homes get scarcer and pricier

My first prediction is that starter homes become the rarest and most in-demand product in the GTA. At the end of 2024, months of inventory for these homes sat at just 2.5. My second prediction follows: prices rise. In 2024, 42.3% of all homes sold in the city of Toronto were starter homes priced between $900,000 and $1.3 million. Half of them sold above the original asking price, and the average time on market was 10 days. A good number sold within 3 days, many with no conditions at all. I expect the median price of these homes, currently around $1.2 million, to climb, and reaching $1.3 million in the city would not surprise me. In the areas around Toronto the increase is real but softer, since there is more supply and the market leans a little more toward buyers.

Why buyer demand keeps climbing

My third prediction is that buyer demand grows in 2025, and the main driver is falling interest rates. Lower rates hand buyers more purchasing power, and rates are expected to drop further. On top of that, new mortgage rules raised the insured mortgage cap from $1 million to $1.5 million, aimed right at the high-demand starter-home segment. A first-time buyer in that price range can now take a 30-year amortization, which stretches their buying power even more. Even if a Conservative government takes over, which is quite possible, I do not expect them to reverse a rule that helps transactions. Demographics push the same way: the biggest buyers of starter homes are millennials, ages 28 to 43, the largest group after the boomers, and many are starting families and looking for that first house.

The recession question

My fourth point is the chance of a recession. We cannot say for certain whether Canada tips into one. Unemployment sits at 6.8% right now. During the 2008 and 2009 recession it was 8.7%, so the warning signs exist without being at crisis levels. In uncertain times, people who own homes tend not to take risks. They stay put, which means fewer homes come to market. Worth noting: about 42% of Toronto homes are mortgage-free, and around 40% in the GTA. Owners with no mortgage payment are even more likely to sit tight in a weak economy, keeping new listings off the market.

Not enough homes will come to market

That leads to my fifth prediction: not enough freehold homes come to market in 2025. Single-family housing starts have fallen below where they were in the 1990s, even though the GTA population has roughly doubled since then. Freehold building permits in Ontario have dropped to 20,000, about the level of the early 1990s. The reason is cost. You can have the capital and the know-how and still find that building does not pencil out. Land in the GTA is not cheap, materials keep rising, and municipal, provincial, and federal charges pile on top. Around 18% of Canadians, roughly 8 million people, live in the GTA, and the gap between population growth and new homes keeps widening. Whatever government comes in cannot fix freehold supply quickly. Even a decision to change course would take years to show up as more homes.

So my read on 2025 is a tight, competitive market for freehold starter homes in the $900,000 to $1.3 million range, sharper inside the city of Toronto and a bit softer around it. If you are thinking about buying or selling and want to talk it through, fill out the form at the bottom of this page or book a free consultation with me. Stay well and take care.