The Importance of Taking a Multi-Year View when Investing in Real Estate

Greybrook and our investors have been deploying equity in large scale real estate opportunities across the GTA, southern Ontario, and select U.S. markets for more than two decades. Being able to invest capital successfully requires not only a disciplined approach to fully understand risk and opportunity, but also the ability to take a long-term view of market fundamentals. Real estate is an asset class that often moves in multi-year cycles, so making investment decisions based solely on today’s conditions can be shortsighted. Instead, investors must assess where the market is likely to be heading over the next five to ten years. 

Shifting Supply and Demand Dynamics 

The past five years have seen significant disruption to the real estate market across North America. The COVID-19 pandemic had a wide-ranging impact on the real estate market, including major supply chain breakdowns, shifts in buyer preferences with the advent of remote work, and a significant pull-forward of future demand and sales activity as central banks dropped interest rates to near-zero levels and mortgage rates fell to historic lows. However, inflation began rising sharply in the aftermath, peaking in mid-2022 at its highest levels in over 40 years. In response, central banks reversed course on interest rate policy and embarked on the most rapid interest rate hiking cycle since the 1980s. 

The rate hiking cycle significantly cooled market activity, with sales declining over the past two years, and new construction starts slowing considerably as a result. However, the overall impact of these changes has not materially changed the long-term trajectory of the market, particularly in the GTA and southern Ontario. The housing supply gap—that is, the number of housing units that would be required to accommodate the projected population growth over the next ten years—was previously forecasted at 1.7 million according to the Smart Prosperity Institute, a non-governmental organization and policy think tank. Strikingly,  45% of that shortfall is concentrated in just the City of Toronto, Peel Region, and York Region alone. 

The overall degree of this supply shortage will ease somewhat with the recently announced immigration strategy under Prime Minister Carney. Aimed at stabilizing permanent resident admissions and capping the number of temporary residents, immigration levels are expected to fall from an average of roughly 1 million per year to an average of 380,000 per year from 2025 through 2027. While this marks a significant reduction, it still exceeds the pre-COVID average of roughly 315,000 per year (2017-2019). As a result, the housing supply gap is expected to narrow slightly – from 1.7 million to 1.4 million. However, nearly two thirds of Canada’s housing shortfall is still in Ontario, with nearly half of that total concentrated in Toronto, Peel, and York. Closing the revised gap within the ten-year target period would require reaching an average of 140,000 new construction starts per year—and sustaining that pace for the next decade. 

The likelihood of reaching this revised target appears low—which becomes even more apparent when looking at housing starts data from Statistics Canada, which shows that Ontario has averaged just over 81,000 housing starts annually over the past decade (the last time Ontario reached 100,000 housing starts was back in 1987). Compounding this challenge further is the recent trajectory, which has seen a further decline in starts so far in 2025, with projections suggesting fewer than 50,000 starts if the current trend continues. 

What Changes Lay Ahead 

Though the long-term supply and demand fundamentals have shifted, they remain quite supportive of housing prices over the long-term. Supply issues will continue to persist unless a combination of price stability or cost reductions bring more viable projects online and introduces new supply into the market. Various levels of government are beginning to acknowledge the impact of taxes and fees on the cost structure of the new housing market. Some municipalities have acknowledged the impact that development charges, community benefits charges, or other application and permitting fees have on new construction costs, with Vaughan and Mississauga among the first cities to scale back or cut development charges. Toronto City Council also recently voted to freeze what were scheduled increases in development charges. Development charges in particular have risen roughly 4-5 times the rate of inflation over the past decade, so any freezes or reductions are likely to have a noticeable impact on overall housing costs. 

At the federal level, both the Liberal and Conservative election platforms have included pledges to eliminate GST on new housing, demonstrating a broad consensus of the role that taxes and fees have played in driving housing costs (and therefore home prices). The Liberal election platform also included a pledge to work with municipalities to reduce development charges on multi-unit residential buildings. 

Other policy shifts include the reintroduction of 30-year mortgage amortizations for new construction and removing the mortgage stress test for renewals on uninsured mortgages. The Canadian Home Builders’ Association (CHBA) and other industry groups  are also advocating for further changes such as making the stress test dynamic (thus lowering the qualifying hurdle when rates are higher) and introducing 7- and 10-year mortgages that are free of the stress test requirement. Taken in aggregate, these changes should help to alleviate the challenge for homebuyers to access their preferred type of housing and stimulate new demand in the market. 

Where to Find Opportunity 

While demand is expected to dampen from recent record-setting years, it should nonetheless stay persistent based on continued population growth and supportive policy changes—all set against the backdrop of a declining interest rate environment. The Bank of Canada (BoC) has already reduced its policy rate from 5% to 2.75% since early 2024 and is widely expected to continue cutting throughout the year. As noted above, the outlook on the supply side has continued to deteriorate based on the slowdown in new home sales, opening the possibility of a record low number of new housing deliveries from 2026 and beyond. 

Investors with a forward-looking view and a disciplined approach to risk and prudent underwriting can find opportunity amongst these changing market dynamics. Greybrook is focused on identifying prime development sites in urban and suburban areas in Toronto and throughout the GTA. Our deep knowledge and breadth of experience in southern Ontario allows us to carefully understand and manage risk, while positioning us for success as stability returns in the years ahead. Looking beyond the GTA, Greybrook also continues to expand its U.S. footprint, targeting select markets such as Texas and other Sunbelt regions for value-add opportunities that offer a blend of yield and capital growth. 

Reach out to our dedicated team today to learn more: [email protected]