Townhomes Emerge as Bright Spot in Toronto's Struggling New Home Market
Amid a challenging housing landscape in the Greater Toronto Area, the new home market is revealing signs of weakness that may be more severe than official statistics suggest. However, a distinct segment is demonstrating unexpected resilience as the spring market unfolds.
Construction Data Reveals Deeper Challenges
According to the Canada Mortgage and Housing Corporation, housing starts across the Toronto metropolitan area declined by 28 percent year-over-year in February. This metric, which measures the rate of homebuilding, paints a concerning picture of the current construction climate.
Benjamin Tal, deputy chief economist at CIBC, suggests the situation might be even more dire. He indicates that the actual number of units developers are breaking ground on could be overcounted by as much as 50 percent. "At this point, it's very misleading," Tal stated regarding the official data.
The economist explains that housing starts reflect when concrete foundations are poured, which can occur 12 to 18 months after initial site work begins. This lag means current data reflects decisions made over a year ago. "What you're seeing now is something that happened a year and a half ago. This is not what's happening now, which means housing starts at one point will nose dive," Tal elaborated.
Condo Market Faces Particular Pressure
The weakness in new home construction and sales appears concentrated in micro-condo apartments. "It's not a dead market by any stretch of the imagination—the condo market is," Tal emphasized.
January sales figures from the Building Industry and Land Development Association illustrate this stark contrast:
- Single-family homes: 184 units sold across the GTA, representing a 26 percent year-over-year decline
- Condo units: Only 85 units sold for the entire region, marking a dramatic 50 percent year-over-year decrease
The downturn has been so severe that no new condos have launched sales in Toronto since September of last year.
Townhomes Show Unexpected Strength
Despite broader market challenges, certain housing types are generating increased interest. Cheryl Shindruk, executive vice-president of low-rise developer Geranium, noted: "We're seeing two market areas where there's been some sales activity. All of that would be in product that is priced under $1 million."
These areas include smaller ground-oriented homes, particularly townhouses, as well as aggressively priced completed homes. Townhomes have emerged as a standout segment in the new-home market recently.
Pauline Lierman, vice president of market research at Zonda Urban, observed: "It's not gangbusters, but it's been positive." Interest has grown outside the urban core, particularly in Mississauga, King, and Vaughan.
First-quarter data reveals significant movement in townhome development:
- 2026: 15 townhome projects launched with approximately 750 units
- 2025: 6 townhome projects launched with approximately 400 units
Of this year's releases, about 400 homes have already sold, indicating substantial buyer interest in this segment.
Industry Shifts Toward Single-Family Focus
The condo downturn has prompted strategic shifts among developers. Plazacorp, traditionally focused on high-rise projects, has not launched a new condo in over three years despite having eight GTA condo projects under development.
Scott McLellan, CEO of Plazacorp, explained the company's strategic pivot: "It was becoming a little bit more difficult to build in the 416." About five years ago, the company began expanding its suburban single-family presence, a direction reinforced by today's market conditions.
The company's current focus includes King East Estates, a single-family development in Richmond Hill featuring detached, semi-detached, and townhomes.
Cautious Optimism for Market Recovery
Industry professionals express measured hope for market improvement, particularly regarding recently announced provincial and federal tax rebates for first-time buyers of new homes.
McLellan shared his outlook: "We're quietly optimistic about the fall market. When people are feeling the confidence to buy again, we think the single-family housing market is going to come back a heck of a lot quicker than the downtown, 416 condominium market."
He added a sobering prediction for the condo segment: "The condo market, I think, is still going to be quiet for another couple of years in the downtown core."
As Toronto's new home market navigates these complex conditions, the townhome segment's relative strength offers a glimmer of hope in an otherwise challenging landscape, particularly for buyers seeking homes under the $1 million threshold.
