What will the next 12-24 months look like for the construction & real estate development in Toronto & GTA? (according to chat GPT)

Here’s a seasoned economist’s outlook for Toronto & the GTA’s construction and real estate development over the next 12–24 months, based on current data and forecasts.

🏗️ Macroeconomic & Market Overview

1. Interest Rates & Monetary Policy

• The Bank of Canada recently began cutting its overnight rate from its peak (~3%–3.25%), with another ~75 bps in cuts anticipated by early 2026 (economics.cibccm.com, Reuters).

• Impact: Lower borrowing costs support housing starts, especially in low-rise. However, elevated debt levels and inflation keep support cautious.

2. Economic Growth & Employment

• Ontario real GDP growth predicted at ~0.8% in 2025 and ~1.0% in 2026 (Ontario Budget).

• Consumer and employment growth weakens, potentially weighing on housing demand—though infrastructure spending (~C$2.4 B for 2025/26) offers support (TD Economics).

• Recession risk: 55% chance of near-term recession across Canada .

3. Trade, External Uncertainty

• Ongoing U.S.–Canada trade tensions and tariffs are depressing buyer confidence, dampening prices (e.g., Toronto -4% projected drop in 2025) (Reuters).

• A de-escalation of trade tensions would significantly improve outcomes.

4. Immigration & Population Growth

• Canada’s tightening of immigration will curtail population growth and rental demand (Canada Mortgage and Housing Corporation).

• Slower inflows translate to weaker structural housing demand.

5. Construction Costs & Financing

• High material and borrowing costs strain developer margins. Pre-construction sales off ~72% in GTA, inventory backlogged (~78 months) (Reuters, LinkedIn).

• Reduced investor appetite in condo market; low-rise and rentals fare slightly better (economics.cibccm.com).

6. Government Policy & Infrastructure

• Elevated provincial capital spending and federal/provincial incentives for rentals and affordable housing (e.g., Housing Accelerator Fund, Waterfront projects) (Wikipedia).

• Federal Build Canada Homes proposals and renewed Greenbelt protections maintain supply constraints near core urban areas (Wikipedia).

🔮 Forecast Summary: 12–24 Months Outlook

🔢 Probabilities of Key Events

• Trade de-escalation (↑consumer/investor confidence): Medium (~50%)

• Recession in Canada in next 12 months: Medium–High (~55%) (The Real Economy Blog)

• Bank of Canada completes ~75 bps rate cuts: High (>70%)

• Resurgence in condo sales: Low (<30%) until affordability improves

🚧 Private Residential Development Outlook

🔹 Low-Rise (detached, townhomes)

• Supply tight: Starts suppressed from prior cycles, backlog clearing slowly (Reuters, Canada Housing Market).

• Outlook 2025–26: Recovery likely as rate cuts take effect; demand up from first-time buyers and improved affordability.

• Constraint: Land/zoning limits; ‘missing middle’ incentives can boost pace.

🔹 Mid-Rise (4–12 storeys)

• Status: Moderately affected; less financial strain than towers but impacted by weak investor sentiment.

• Outlook: Moderate recovery in 2026 backed by policy (e.g., HAF targeting duplex/triplex) (Reuters, Wikipedia).

• Constraint: Zoning approvals, municipal capacity.

🔹 High-Rise (13+ storeys)

• Severe headwinds: Pre-sales down ~72%, inventory glut, soft absorption (Reuters).

• Outlook: Continued construction slowdown through 2025; pick-up only once price floors established by late 2026.

• Catalyst needed: Rate cuts + trade clarity to boost investor demand.

✔️ Major Risk Factors That Could Shift the Outlook

1. U.S.–Canada trade resolution or escalation

   • De-escalation: stabilizes confidence, softens price declines.

   • Escalation: deeper price drops, weaker starts – Probability: Medium

2. Sharp BoC policy shift

   • Larger/faster rate cuts → earlier recovery in residential starts (~high probability).

3. Immigration policy reversal

   • Increased inflows → rental and condo demand uptick; currently low–medium probability.

4. Zoning/Greenbelt reform

   • Opening new lands + “missing middle” zoning → boost low-mid rise supply but slow to materialize; Medium probability given current politics.

5. Recession onset

   • Would curtail sales and starts severely; risk ~55%.

🧾 Conclusion

Over the next 12–24 months, expect:

• Low‑Rise: Will lead recovery (~2026), financial viability stronger.

• Mid‑Rise: Slow but steady pickup by late 2025/2026.

• High‑Rise: Deep lull until rates decline and buyer sentiment improves.

Major factors: Interest rates (BoC), macro economy (recession risk), trade policy, immigration and supply-side constraints remain critical. Deviations from baseline—especially on trade or recession—could significantly alter trajectories.

Feel free to drill deeper into any segment (e.g., affordable housing incentives, municipal planning, infrastructure linkages).