Prospective new condo buyers in the GTA are shopping in a very different macro environment than the one that powered the last cycle. Growth has slowed, inflation has cooled, and interest rates are drifting lower, but confidence is still fragile. That was the core theme of a recent episode of my Toronto Under Construction podcast, where I sat down with three of Canada’s top economists: Eric Lascelles of RBC Global Asset Management, James Marple of TD Economics and Peter Norman of Altus Group. Their message for buyers was clear: This is not 2021, but it is not the 1990s bust either. It is a slower, more sober market that rewards careful assessment rather than pure speculation.

Interest rates

The starting point is interest rates. The Bank of Canada has pulled its policy rate down to roughly 2.25 per cent and is signalling a gentle easing path, not a race back to emergency level lows. As Eric Lascelles pointed out on the show, inflation has largely come back toward target, while GDP has been flat for a couple of quarters and unemployment is higher than anyone would like. That mix gives the Bank cover to pivot from “kill inflation at all costs” to “support a fragile expansion.” For condo buyers, this means mortgage rates should stay meaningfully lower than the peaks we saw in 2023 and early 2024. The important nuance is that this is a stabilisation story, not the beginning of another potential bubble.

Business investment

Growth itself is being restrained by trade friction and weak business investment. Marple walked through the impact of higher U.S. tariffs and an unpredictable trade environment on Canadian exports. The effective tariff rate is still modest, and the pain is concentrated in a few sectors, which is why it has not turned into broad-based inflation. But it has clearly dented business confidence and hiring plans. For a prospective buyer, the main risk is not that tariffs add $50 a month to the cost of a fridge. It is that slower export growth feeds into slower wage growth and more cautious employers. Job security and a realistic view of future income matter more now than obsessing over whether the overnight rate falls another quarter point.

Construction and development

Construction and development sit right at the intersection of these macro forces. On the podcast, Norman highlighted that tariffs have nudged up the cost of some imported components, but construction is still overwhelmingly local. The bigger driver of pricing on site is demand for new product. With GTA pre-construction condo sales running near multi-decade lows, far fewer projects are moving from glossy brochure to excavation. That has already pushed bids from trades down from 2024 peaks and taken some pressure off hard costs per-square-foot. In the short term, record completions mean an unusual amount of choice for buyers willing to step into inventory. In the medium term, today’s weak sales pipeline points to fewer completions late in the decade if demand rebounds, which sets up the risk of another supply crunch down the road.

Debt

Debt, unsurprisingly, was another recurring theme. Canada’s household debt-to-income ratio has been the subject of scrutiny for more than a decade, while the United States wrestles with very large government deficits. Lascelles and Norman both made the point that some of this is simply a reshuffling of who holds the debt. Infrastructure and growth-related costs that used to sit on public balance sheets are now embedded in development charges, then folded into new-home prices and financed through mortgages. It is the same economic burden, just carried by households rather than governments. For an individual condo buyer, the important question is not the national ratio, it is whether the payments fit comfortably within your budget even if rates stop falling or edge slightly higher.

Productivity and growth

The final piece of the macro puzzle is productivity and long-run growth. Canada’s GDP per capita has slipped over the last few years and our productivity gap with the United States has widened. That suggests slower average income growth, even if headline GDP looks respectable. At the same time, population growth remains strong and planning and approval processes have not suddenly become faster or cheaper. Put all of that together and you get a condo market that is more likely to grind higher, with returns driven by rent, replacement cost and holding period rather than quick flips.

For 2025-era buyers, the playbook that emerges from this macro backdrop and the insights are fairly simple. Stress-test your mortgage at a higher rate than the one you are quoted. Budget as if prices stay flat for a few years rather than assuming automatic capital gains. Focus on projects from credible builders that are actually likely to get built, in locations with real end-user demand, not just investor hype. Treat a new condo as a long-term housing and wealth decision instead of a lottery ticket. The easy money phase is over, but for buyers who underwrite their own household balance sheet the way a lender would underwrite a project, there is still a rational case for stepping into ownership.

Do your homework, surround yourself with an experienced team, and good luck.