By Tom Parkin
March 18th, 2025
BURLINGTON, ON
After the unchecked speculation peak in 2022, a new marketplace stand-off has builders refusing to build while buyers refuse to pay. We’ll see who blinks.
John Maynard Keynes’ sarcastic quip that “markets can remain irrational longer than you can remain solvent” appears to have a new twist in the Ontario housing market, three years after unchecked speculation led to soaring prices then market implosion.
Buyers are refusing to pay more despite falling borrowing costs, lower prices and slow construction, all factors that could rationally be expected to spur an increase in house prices in a province with a massive pent-up housing demand.
The benchmark house price for the Greater Toronto Area was $20,000 lower last month than February 2024 and remains $239,900 below the price peak of March, 2022, according to data released by the Canadian Real Estate Association released today.
February starts just 33 per cent of Ford PCs’ target
Despite price declines of the past 35 months, the GTA benchmark house price remains $316,900 (42 per cent) higher than when Doug Ford became premier.
But though market prices are significantly higher than just a few years ago, it appears they now aren’t high enough to cause builders to build.
The Canada Housing and Mortgage Corporation also reported data this morning showing just 4,100 housing starts in Ontario during February, a 37 percent tumble from February 2024. February’s starts were only 33 percent of the 12,500 monthly target needed to meet the Ontario government’s own Housing Affordability Task Force recommendation.
Data on building construction investment released by Statistics Canada today shows that while investment in Ontario multi-unit residential construction is now only seven per cent lower than the peak set in October 2023, investment in single dwelling construction has collapsed 41 percent from its peak in September 2022.
Industry blames Trump, but data signals the problem is the price
Just how much can be blamed on Trump’s tariffs?
The real estate industry’s explanation for market inactivity is the uncertainty caused by Trump’s tariffs, as buyers worry about their incomes or wait for falling economic growth to cause deeper interest rate cuts.
Without a doubt that holds some truth over the past month or two. But not the past year or two.
The simple explanation is that Ontarians, absent the panicked and irrational fear of missing out, refuse to pay prices they cannot afford.
Unreasonable rents continue to leave little room for saving. Purchase prices remain very high.
Other data provides more evidence of a consumer problem. Statistics Canada retail data shows, that despite higher sales elsewhere in the country, Ontario retail sales remain lower than in spring 2022. Ontario’s unemployment is higher than the national rate. GDP data shows spending on items like furniture and home renovations are down.
Of course, conceding that prices are still too high is probably not something the real estate industry wants to say out loud. Deflection is preferred.
Ford’s political opponents failed to make the case
And others want to move on, too. The Ford PC government took action to check housing speculation, allowing the GTA benchmark price to increase $556,800 (76 percent) in just 45 months.
Building trade unions might be upset if they weren’t so busy counting the tens of millions of dollars they have been receiving from the PC government.
The price surge and implosion lie squarely on Doug Ford’s head, as does the economic destruction it caused, which goes beyond housing. Real estate implosions always do.
Unfortunately, it’s a story the opposition parties failed to piece together for Ontarians, allowing the lackluster PCs to coast to an undeserved majority with which they will continue to fail on affordability.
The industry’s refusal to build until prices rise is itself probably costing billions in lost economic growth and tens of thousands of construction jobs. Building trade unions might be upset if they weren’t so busy counting the tens of millions of dollars they have been receiving from the PC government.
The Ontario twist on Keynes’ observation seems to be that industry will remain unproductive until demand turns irrational. Then we go round again.
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