Will Toronto Real Estate Prices Surpass Vancouver?
Among Canada's growing real estate market, two cities lead this discussion: Toronto and Vancouver. Both are named for having very high prices of property, competitive housing markets, quality of living , and huge demand from both domestic and international buyers. But with the sudden growth and urban development of Toronto, consumers wonder: will Toronto real estate prices outshine Vancouver in the near future? In this guide, we will investigate the difference between these two markets, the factors influencing price trends, and review predictions for 2024 and beyond.
How Do Toronto and Vancouver’s Real Estate Markets Compare?
Vancouver is no stranger to high real estate prices, primarily caused by high demand from international buyers, with most demand coming from Asia, while land remains in limited supply. Physically, the city is confined by mountains and ocean, with little room for expansion. Its supply, therefore, remains very strained. This scarcity has constantly pushed prices and turned Vancouver into one of North America's most expensive cities.
Over the past 20 years, Vancouver’s benchmark home prices have increased by roughly 240% since January 2005 , with the current benchmark home price sitting at roughly $1.2M. On the same note, Vancouver’s benchmark home prices have increased by 85% over the last 10 years. More recently, there has been an increase of 35% over the past 5 years for Vancouver’s benchmark home price relative to the CPI inflation of 18% on the same rate.
Meanwhile, Toronto’s population has increased tremendously within the last ten years. Demand for housing in Toronto is considered to be stronger due to the high-tech industry, immigration, and growing financial sectors. By contrast, Toronto had a lot more room for expansion and growth; that fact helped keep supply somewhat flexible, although it now also faces challenges in terms of affordability and availability when it comes to housing.
Competition in unaffordable housing with Vancouver is somewhat new to Toronto. While there was an 18% price decline from the peak of $1,313,800 in March 2022, Greater Toronto benchmark home prices have gone up 42% over the past five years to $1,082,200 this August 2024. At current prices, Vancouver is still more expensive. With the relatively stable prices in Vancouver over the past few years and this growth in Toronto, the largest city in Canada may catch up to Vancouver in benchmark housing prices.
What Factors Are Driving Real Estate Price Growth in These Cities?
Several factors have led to the prices of real estate in both Toronto and Vancouver. The first big contributor is population growth. Toronto remains one of the favorite destinations for immigrants, hence raising the demand for housing. Being the financial and business hub of Canada, it also attracts professionals from across Canada and even abroad at large, pushing the demand for homes even higher. While that demand is currently rising, you can expect to see immigration levels fall back down after stricter policies set in place for international students, foreign workers, and spouses .
At the same time, Vancouver cannot compete with Toronto in terms of the pace of growth of the population. Housing prices have reached such a high level that many people cannot afford to stay in the city. Simultaneously, the government policy to cool the market-foreign buyer's tax and speculation tax-causes a drop in demand from overseas buyers whose role historically has been noticeable in this real estate market.
Another facet involves new development and supply. Within the city of Toronto, there are many major residential developments underway currently, with large turnover in the downtown core and its environs immediately around it. New projects would meet a portion of the rising demand and could go some way to stabilize prices over a longer period of time. Large-scale projects in Vancouver, however, are much more limited due to its natural barriers.
Interest rates are another influential agent in price determination for real estate. The interest rates have been kept historically low in the country for the past couple of years; this has, in turn, made it cheaper to borrow from banks and increased demand for housing across the country. As that begins to climb, though, that could cool off the market in both cities-especially among first-time homebuyers, who may find themselves less able to afford homes in an already expensive market.
What Are the Current Trends and Future Predictions for 2024-2025?
Looking to 2024 - 2025, both Toronto and Vancouver are expected to maintain their high demand, albeit subject to several factors that may affect future price trends.
With Toronto's increasing population, its demand is most likely going to continue its high rate of growth, especially as the city will be very appealing for work relocators. The expanding tech and finance ecosystems within Toronto will be at the forefront of the professional appeal, and will bring high-income workers who seek housing. At the same time, Toronto is well-positioned to develop new housing supply that will offset increases in price, but in the near term, the supply likely will not keep up with demand. This would subsequently lead to continued increases in real estate prices in Toronto.
While in high demand, Vancouver will most likely experience more stable growth. The limited land area in which to expand within the city and already high prices could prevent the kind of rapid growth Toronto is experiencing. In addition, government policies aimed at making housing more affordable could keep prices from skyrocketing further. Its appeal as a world city, however, will continue to make it attractive to buyers of all caliber, particularly the high-income bracket that keeps prices at a premium.
Will Toronto then outpace Vancouver in terms of real estate prices? Maybe, but it is anything but a certainty. Even as Toronto’s demand is growing rapidly and closing the gap with Vancouver, the supply constraints of the former and its international appeal may allow Vancouver to stay well out in front for at least the next couple of years. If Toronto's growth maintains this pace, and the Vancouver market continues to stay relatively stable, we may find that Toronto overtakes it in the longer-term view.
How to Navigate Toronto and Vancouver Housing Markets
In summary, both Toronto and Vancouver are dynamic real estate markets with their peculiarities and challenges. Though Toronto is catching up very fast with Vancouver in terms of real estate prices, the housing market race will depend on population growth, government policies, and housing development.
With varying market dynamics on both the East and West Coasts, understanding those specifics is key for prospective buyers and investors who want to make informed decisions. If you are looking to buy in either Toronto or Vancouver, let Clover Mortgage guide you through these competitive markets with personalized advice .
FAQ
What is the future of Vancouver real estate?
The future of real estate in Vancouver will remain strong but challenging; whereas demand is high, supply is limited, raising concerns about affordability. Among the policy responses, changes in the multiples' zoning might soften the long-term supply constraints. Changes in interest rates will affect demand, leading to short-term cooling but expected long-term growth in the desirable market.
What is the forecast for real estate in Canada in 2025?
A gradual recovery is forecasted for 2025, driven by expected decreases in interest rates. Home sales are expected to rise 6.2% over 2024 with about 501,902 properties trading hands , while the national average home price is forecasted to rise by 5% to about $729,319 . Growth after the cooling period brought on by increased costs of borrowing-which, with the rate cuts in view, is expected to pick up-is gradually strengthening the housing market.
How much will houses cost in 2025 in Vancouver?
The average house price in Vancouver is forecasted to surpass the $1.2 million benchmark price from 2024. Strong demand due to population growth, and housing supply constrained, continues to push prices upwards. While interest rates in 2025 will be a little lower and could prompt more market activity, prices will continue to stay well over inflation given fundamental supply limitations. There will be moderate growth in the market, as the prices of both detached homes and condos will be on the higher side.
