Way back when everyone wanted to buy development land, my friend Jeremiah Shamess of Colliers used to always tell me that the only way to do this was to either (1) pay the most or (2) believe in something that others don’t. This — making non-consensus bets — is something I like to talk about a lot on this blog, but what did that mean back then?
Well, when sites were seeing dozens of offers and the market was hyper-competitive, you really had to work to find any sort of overlooked value. Maybe it was an assembly. Maybe it was a density opportunity that others were missing. Or maybe it was a rail setback that the market felt would neuter the site, but that you had a solution for. Whatever the case, believing in something different was hard work.
Today, things are a lot different. The consensus bet would be to not buy development land in the first place, and the non-consensus bet would be to buy. But instead of having to believe in unique unlocks for a site, it’s obvious that the greater obstacle is believing that the market will be there to absorb your space. And if it is there, at what price?
Nobody really knows, and that’s what makes it non-consensus. But as always, non-consensus bets are where the greatest opportunities exist. That was true when the market was booming, and it remains true today.
Cover photo by Alfan Ziyyadan on Unsplash
There is a great quote in Shakespeare's Hamlet: "There is nothing either good or bad, but thinking makes it so."
The point of this quote is to argue that the universe is fundamentally neutral. When an event happens, it is neither good nor bad; the label is determined by the judgment we ultimately bring to it.
Take snow, for instance.
Here in Toronto, I find that when it snows, people tend to look at it as a bad event. They think of the traffic that will ensue and the work that will be required to clear out walkways and driveways. But I love snow (maybe because I don't have a driveway). Snow is good. As an avid snowboarder, it gets me excited for the winter season.
And right now I can tell you that I'm praying to the snow gods for a dumping or two in Northern Utah. The entire Mountain West region is off to a slow start this season and has had to delay resort openings. My judgment tells me this is "bad."
Now, let's consider the real estate development market.
The prevailing narrative right now is that it's bad. But Hamlet would say that only thinking makes it so. An alternative way to think about the market is that it's presenting a generational buying opportunity.
Like snow, I would call that a good thing.
Rental apartment completions in the Greater Toronto & Hamilton Area (GTHA) are expected to exceed condo completions for the first time in a very long time starting in 2028. But what does this mean for the overall market, and is it actually going to be enough new housing? Let's look at some of the numbers.
Last year, the GTHA recorded 29,671 new condo completions. This was some sort of a record. This year, condo completions are projected to total around 31,396 homes. Even higher. But then completions start to fall off, with 17,487 homes scheduled for completion in 2026. By 2029, this number is expected to be close to 1,000. So let's call it zero for argument's sake.
If we are to crudely assume that 50% of these new condominiums ultimately make it to the secondary condo rental market, then we are expecting nearly 16,000 condo rentals this year, just under 9,000 condo rentals in 2026, and ultimately no new condo rentals by around 2029 (or some number close to it).
Now let's consider the purpose-built rental side of the equation.
The 10-year average for purpose-built rental apartment starts in the GTHA is only 2,819 homes. This is a far cry from the volume of rental housing that we delivered in the 60s and 70s. Of course, with the new condominium market largely shut off, there's renewed interest in building purpose-built rentals.
In 2024, purpose-built rental apartment completions totalled 5,537 homes. And in the first half of this year, 3,156 homes reached the occupancy stage. Extrapolating out, I'm guessing that puts us somewhere around 6,000 new purpose-built rental apartment homes by the end of 2025.
If we pause and think about only 2025, we're on track to deliver roughly 37,000 new condo/rental apartments and ~22,000 new rental homes (again assuming 50% of the new condominiums become secondary rentals). I view this as our peak supply year for this cycle.
There's a lot of talk about a "record" number of purpose-built rental apartments now under construction, and while it is true that the numbers are elevated compared to the latest 10-year average, it is not a long-term record compared to the 60s and 70s and, more importantly, it is not enough to offset our dwindling new condominium supply.
Even if purpose-built rental completions spiked to 8,000 or even 10,000 new homes next year, we are still going to see a drop in new rentals and new housing overall in the GTHA. 2026 is the turning point year where new supply turns south. And it's going to keep going south until probably 2029, which is when I believe we will see supply bottom out.
Nothing in this post should be construed as investment or development advice, but here's the way I'm thinking about it:
2025: ~37,000 new condominium/apartment homes (peak supply year resulting from the pandemic boom)
2026: ~25,000 new homes (supply begins its decline)
2027: ~18,000 new homes
2028: ~10,000 to 13,000 new homes
2029: ~8,000 to 10,000 new homes (supply bottom)
I have no idea what will happen with interest rates, immigration, investor sentiment, and the countless other factors that impact a housing market, but even if things started to turn around next year, it would be mostly impossible to avoid the housing supply bottom that I believe we have coming in 2029. Buildings take a long time to build.
Conclusion: I think that 2026 will prove to be an excellent year to buy assets (land, unsold inventory, IPP, and so on), and that 2028 onward will be an excellent time to be delivering new homes. By then, we should be dramatically undersupplying the market. It doesn't feel that way today, but eventually the bill from our frozen development market will come due.
Cover photo by Adam Vradenburg on Unsplash