If you’re a prospective new-home buyer or investor in Toronto, it’s worth paying as much attention to the future supply pipeline as you do to interest rates. Earlier this decade, a tightening mix of higher borrowing costs, elevated construction costs and rising municipal fees hurt the viability of many new home projects. More recently, a major sales slump (to say the least), has shut down the pre-construction condominium market. This will have a major impact on how many new homes come to completion later this decade and into the 2030s. When supply slows in a city with structurally strong demand, affordability does not usually improve.

Three pressures

On the Toronto Under Construction podcast, Capital Developments President Carlo Timpano pointed to three pressures that impacted the market in the early 2020s: “High demand for labour and trades in Toronto, general trade inflation/supply chain issues and capacity was cut.”

Those are not minor headwinds. When trade availability is tight and materials remain volatile, schedules stretch, contingencies rise, and lenders and equity partners become more conservative. Layer on top of these the City of Toronto’s massive development charges, the economics of new housing become harder to underwrite, whether rental or condominium. These costs ultimately flow through to end-users in the form of higher required condo pricing, and over time, higher rents.

That cost and risk environment is also reshaping what kinds of projects developers are willing to pursue. Timpano believes, “these factors are calling into question the types of projects developers are taking on,” and the practical consequence is that fewer “borderline’ sites will pencil out. Some sites might have worked for condo developers in 2022, but don’t work for rental developers in 2026.

Reduced future competition

If you are an end user or a budding investor, the reduced future competition means inflation in asset value and higher costs for residents of new buildings.

Timpano is also critical of Toronto’s approach to funding growth-related infrastructure: “The City of Toronto is placing all the needs to expand capacity, and deal with infrastructure challenges on new homeowners instead of raising property taxes to spread the burden of City building to all of the people who benefit from the City.” If the prevailing stance is that “growth should pay for growth,” and the bulk of that burden lands on new housing. New-home buyers should not be solely responsible for providing infrastructure that benefits all Torontonians.

The condo market backdrop has shifted as well, and that affects both buyers’ expectations and investors’ models. Timpano recently said in a media interview that, “We still believe there’s a condo market in a different form than it was 24 months ago,” adding, “There’s still a demand for condos if you can sell them at close to resale prices and with a new building typology.” The takeaway is that pre-con demand hasn’t vanished, but it is more selective and more price sensitive. Buyers are less willing to absorb large premiums, and investors need to be realistic about end values and rents rather than assuming peak-cycle appreciation.

Professionally managed product

On the rental side, Timpano argues that well-executed, professionally managed product can still outperform the investor-owned “shadow” condo rental market in certain nodes. One of Capital Development’s previous projects in North York is commanding very high rents: “The Azura product is getting an average rent of $4.80 per-sq.-ft., which is higher than the average rent you’re getting in the downtown core right now on the shadow condo market.” That supports the investment case for differentiated, institution-quality rental product, but it also underlines the main constraint: none of it matters if projects cannot be delivered because costs, fees and approvals make them unfinanceable.

For anyone trying to make a decision today, the bigger point is that supply is governed by math and policy, not by slogans. When approvals take longer, fees rise and construction costs remain high, fewer projects proceed. And when fewer projects proceed, future competition declines, which tends to support higher prices and rents over time.

If you’re worried about buying now and seeing prices meaningfully lower in five years, that scenario typically requires sustained oversupply. With the development pipeline cut off after 2023, oversupply is not the base case. There is likely to be more pain in the market in 2026, but that ultimately means there is opportunity. Look under as many rocks as you can, there might be a great deal waiting for you. Good luck.