Toronto and Vancouver continue to lead Canada’s real estate market, with housing demand in both cities showing persistent strength despite high interest rates and shifting economic conditions. These urban hubs have long been magnets for immigration, job growth, and investment — but what’s really driving the current demand, and what does it mean for prospective buyers and investors?
Population Growth and Immigration
One of the most significant drivers of housing demand in both Toronto and Vancouver is immigration. Canada welcomed over 430,000 new permanent residents in 2023, with a large percentage settling in Ontario and British Columbia. These two provinces are home to the country’s economic engines and cultural diversity, making them attractive to newcomers.
In Toronto, the population growth in the Greater Toronto Area (GTA) has consistently outpaced housing supply, leading to fierce competition, particularly in the resale and rental markets. Vancouver, with its scenic appeal and status as a global city, faces similar pressure as it continues to attract both international migrants and interprovincial movers.
Limited Housing Supply and Zoning Constraints
While demand has soared, housing supply has not kept pace. Both cities face constraints due to restrictive zoning laws, especially when it comes to building high-density or multi-family units in traditionally low-rise neighborhoods.
In Vancouver, the challenge is further compounded by geographic limitations — with the ocean to the west and mountains to the north, the space to build is inherently limited. Meanwhile, Toronto struggles with bureaucratic delays and a lag in approvals for new developments, which restricts the pace at which new inventory hits the market.
Interest Rates and Market Resilience
Despite the Bank of Canada’s aggressive interest rate hikes since 2022, the housing markets in Toronto and Vancouver have remained surprisingly resilient. While there was a noticeable slowdown in early 2023, activity picked up again in the second half of the year as buyers and sellers adjusted their expectations.
Buyers, particularly those with secure employment or long-term investment goals, are still motivated by the belief that prices will continue to rise over the long term. Investors are also returning to the market, capitalizing on the robust rental demand driven by population growth and a tight rental supply.
Affordability Crisis and Government Intervention
Both cities are experiencing an affordability crunch, with average home prices well beyond what most middle-income families can afford. In response, the federal and provincial governments have introduced several policies, including:
- Foreign buyer bans and vacancy taxes to reduce speculative investment.
- Incentives for first-time homebuyers and low-interest loans for new developments.
- Zoning reform initiatives, especially in Toronto, to allow for more “missing middle” housing.
While these measures aim to ease pressure, critics argue they don’t go far enough in addressing the root causes — namely, the mismatch between demand and housing supply.
Outlook for 2025 and Beyond
Looking ahead, housing demand in Toronto and Vancouver is expected to remain strong. The Bank of Canada may begin to ease interest rates if inflation continues to fall, potentially bringing more buyers back into the market. Additionally, both cities are under growing pressure to accelerate housing construction and reform land use policies.
For investors and homebuyers, the key will be navigating market fluctuations while focusing on long-term value and location fundamentals. For policymakers, the challenge lies in balancing growth with affordability and inclusivity.
Conclusion
Toronto and Vancouver’s housing demand reflects broader demographic and economic trends — from immigration to urbanization and global investment. While challenges around affordability and supply persist, both cities remain resilient, dynamic markets that continue to attract people from all over the world. The future of housing in these cities will depend on how effectively governments, developers, and communities work together to create sustainable, livable urban environments.