Toronto Real Estate Trends For 2022

Table of Contents

The trajectory of Toronto real estate is a hard thing to pin down, but not impossible. Though it might be attractive to think that Covid has drastically shifted the direction of home prices and buying trends nationwide, in the long term, Covid and its aftereffects have not changed Toronto real estate trends so much as they have intensified them. Three major factors at play have set up the Toronto market the way it looks today and will continue to look tomorrow. These are Housing Supply, Interest Rates, and Lifestyle Motivators.

Each of these three factors holds equal weight in the hearts and minds of Toronto homebuyers, and realtors should pay close attention to how their clients react to changes in these three factors in 2022. We won’t make any grand assumptions about how things will change next year for Toronto real estate, only that overall trends will most likely continue as they have since before Covid and that there will be a dip in single-family house sales in the event of an interest rate hike. It’s less important to know what will happen in the future and more important to know why things are the way they are now and how they might change. You can’t understand tomorrow if you don’t understand today.

The Housing Supply in Toronto Real Estate Trends

The housing supply in Toronto falls far short of demand. This is nothing new, and though Toronto has added tens of thousands of new homes in recent years, this has not been enough to keep up with the pace of migration to the city. There are a few reasons for this. First, Toronto is running out of space. From a bird’s eye view, Toronto is a massive sprawl of suburbs populated with single-family homes, extending tens of kilometres from the city centre. The majority of these neighbourhoods were built in the 1950s and 60s and have been occupied ever since. At a certain point (and one day, Canadians will have to figure out just where that point is), the Greater Toronto Area is going to have to stop somewhere.

This lack of space might not be a problem for those who don’t care how far away they have to live from the city, but for anyone looking to live close to downtown, this could make or break your decision to move to Toronto. Whether you’re looking at new or old suburbs, you’re usually only going to find two or three homes listed in any given neighbourhood at a time. In short, there’s no more space to build single-family homes within a reasonable distance of the city centre.

Let’s say you’re not looking for a single-family home but a condo. You’ll have more luck, but the market for condos is just as competitive as it is for single-family homes. It’s naturally much easier to get more housing out of a condo tower than a block of detached homes. That being said, new condos listed in Toronto go just as fast as houses because:

A: they’re closer to the city centre.
B: they are the cheapest option outside of renting.

There’s no reason to expect the demand for condos in Toronto to wane in 2022 or for the supply to increase meaningfully. Again, look at Toronto from above, and you’ll see that most condos are only found on major streets and usually only south of the 401. Just about every neighbourhood has condos for sale, but then only some.

One more thing lacking in terms of supply is price diversity. Outside of some extreme outliers, just about every single-family detached home in the GTA lists at $1,000,000 and above. Regardless of neighbourhood, amenities, proximity to the city, schools, everything, $1,000,000. Homebuyers aren’t left with many options then. If they want to live anywhere near Toronto, having $200,000 ready for a down payment is absolutely necessary.

The same goes for condos, though for a different reason. Condos list for as low as $500,000 throughout the GTA, but that’s just on paper. A bidding war is the norm for buying a condo in the city even after the recent emigration out to the suburbs, which in Toronto is almost meaningless given that houses in the suburbs like Vaughan sell for the same as they do in East York. Barring a true mass exodus out of Toronto or the sudden appearance of hundreds of new condo towers, supply in 2022 will not change.

Interest Rates

As in the United States, interest rates fell in Canada to record lows during the height of Covid, and today they hover around 2.5%. This has been a double-edged sword for Toronto real estate. Out of all the Toronto real estate trends that can change the character of the market in 2022, interest rates will play the largest role. During Covid, homebuyers in Canada took advantage of the low rates to buy houses that otherwise would have been out of reach. This, in addition to other factors, caused the prices of single-family homes in Toronto to climb almost 20% higher than they were the previous year.

Now Canadians expect interest rates to rise in 2022 as the economy continues to improve. We see two different outcomes as homebuyers and sellers alike react to these heightened rates.

  1. Even more people will buy homes during the Winter and Spring of 2022 so as not to “miss out” before the predicted interest rate hike.
  2. Single-family home sales will fall in 2022.

Whether or not this will trigger a decrease in home prices remains to be seen, and we won’t speculate on that. But even if prices trended lower, by 12%- 20%, this would only reset them back a year, not twenty years. It would signal a healthy reaction to the interest rate changes and not a loss of confidence in the Toronto real estate market.

Interest rates are ultimately short-term actors of real estate trends, whereas housing supply and lifestyle motivators play more important roles in composing the character of the market. Therefore, you should make short-term decisions and reactions to interest rates. Base your long-term decisions on the knowledge that, thanks primarily to chronic supply shortages and insatiable demand, single-family home prices will remain stable in 2022 and most likely continue to grow, albeit slowly, at their pre-pandemic rates.

Lifestyle Motivators

During Covid, everyone took some time to analyze what they wanted out of their housing situation. For many people, the answer was space and privacy. Living in “a box in the sky”, as many Toronto residents referred to their condos, just wasn’t going to cut it anymore, and so they moved either into a single family home in the suburbs or out of the GTA entirely. This pendulum swing out of cities and into suburbs and beyond was reflected in the United States just as it was in Canada.

Clearly, people want more space. In a city with so many detached, single-family homes, the Toronto suburbs are always going to be an attractive option for prospective homebuyers looking for more legroom in their lives. If some suburban residents decide to pick up and leave for greener pastures in 2022, they’ll be replaced by inner city residents looking for bigger homes in the suburbs without leaving Toronto entirely. Following behind them will be a widely predicted wave of immigration into Canada. These new immigrants will either rent in the city or pick up the new condos springing up near downtown and surrounding areas.

If so many people are heading out of cities as a result of Covid, why are so many people also still moving in? Though for many, the pendulum of lifestyle motivators has swung towards the suburbs and beyond, it hasn’t swung that way for everyone. Young Canadians and immigrants alike want to live near the centre of Toronto for work, for culture, and fun.

They’ll either rent apartments or buy condos downtown for a few years at a time. The demand for downtown housing is there; it’s just being fed by a different demographic than the one leaving the suburbs and the countryside. Regardless of whether they work from home, in the office, or a hybrid situation, people like to live in downtown Toronto. As Covid recedes and the Toronto nightlife resumes, homebuyers, young and old, will eye those condos as a launching platform for access to what they love most about Toronto, the culture.

Our Conclusion

In 2022, the unprecedented Toronto real estate trends of the last two years will most likely settle down in the wake of rising interest rates. Home values will probably cease climbing by leaps and bounds every quarter, and instead fall back into their pre-pandemic patterns because the other two factors affecting the Toronto real estate market, housing supply and lifestyle motivators, don’t seem to be changing. Though there is a shortage of houses in Toronto, there’s no shortage of people looking to buy them and call Toronto home.