The starter home vs. wait decision is one of the most common dilemmas facing GTA homebuyers today. Buying a smaller, more affordable home now gets you into the market sooner — but means potentially selling within a few years and paying transaction costs again. Waiting for a larger, more permanent home means staying in the rental market longer while saving more. Neither choice is obviously right. The answer depends on your timeline, financial situation, and what the GTA market does in between.
What Is a Starter Home?
A starter home is typically a smaller, more affordable property — a condo, a one- or two-bedroom townhouse, or a modest detached home — purchased as a first step into homeownership rather than as a long-term permanent residence. In the GTA, starter homes generally fall in the $500,000–$750,000 range, though what that buys varies significantly by neighbourhood and property type.
The idea behind a starter home is to build equity in the real estate market while your savings grow, then sell and upgrade to a larger home when your life circumstances — income, family size, career — make it the right move. It's an entry strategy, not a permanent housing plan.
The Case for Buying a Starter Home Now
The strongest argument for buying a starter home rather than waiting is market access. GTA home prices have historically appreciated over time, and buyers who wait for a "perfect" purchase often find the gap between their current savings and market prices widens rather than shrinks.
Building Equity Immediately
Every mortgage payment you make builds equity. Every year in a rental, you're building equity for your landlord instead. Even a modest GTA condo at $550,000 — if it appreciates 3-4% annually — could be worth $615,000–$627,000 in three years, creating a meaningful gain that contributes to your next purchase.
Getting Into the Market Before Prices Rise Further
No one can predict GTA real estate prices with certainty, but waiting is itself a bet — a bet that prices will stay flat or fall. Buying now with a smaller property puts you inside the market rather than watching it from the outside. The principal residence exemption also means any gain when you sell your starter home is completely tax-free.
Tax-Free Capital Gains
Your principal residence is exempt from capital gains tax in Canada. If you buy a starter home for $580,000, live in it for three years, and sell for $650,000, that $70,000 gain is yours tax-free (subject to the principal residence exemption rules). This is a meaningful advantage that renters cannot access.
The Case for Waiting for a Bigger Home
Waiting makes sense in specific situations — and dismissing the "wait" option too quickly leads buyers into a starter home that costs more in transaction fees than it was worth.
Transaction Costs Are Substantial
Buying and selling in Ontario is expensive. Land transfer taxes — Ontario's and Toronto's if applicable — legal fees, real estate commissions, and moving costs can easily run $30,000–$50,000 on a $600,000 transaction. If you buy a starter home and sell in two or three years, you're paying those costs twice. The equity gain has to outpace the transaction costs to make the starter home a financial win.
Short Holding Periods Are High-Risk
If you buy a starter home during a period of flat or declining prices and need to sell within two or three years, you may sell for less than you paid — or barely break even after costs. The GTA market is not uniformly upward-moving in all periods. Condos in particular have seen more price volatility than freehold properties. A short intended holding period increases the risk of a bad outcome.
Life Changes Can Complicate an Exit
Starter homes are designed to be sold. But selling requires a willing market, a buyer, and time. If you need to move during a slow market, you may not be able to sell quickly or for what you need. Planning to "just sell in a few years" assumes a liquid market that doesn't always exist.
Questions to Ask Before Deciding
Rather than making a blanket decision, most GTA buyers should work through these questions:
- How long will you stay? If you plan to hold for 5+ years, a starter home likely makes sense. Under 3 years is risky. 3–5 years is a judgment call based on property type and market conditions.
- What is your realistic path to a bigger home? Do you expect income growth that will make a larger home affordable, or are you hoping purely on price appreciation?
- What are your current carrying costs vs. owning? If rent and ownership costs are similar, owning wins. If ownership costs are significantly higher, the additional cost of waiting while renting may be lower than transaction costs on a short-hold starter.
- What property type are you considering? Freehold properties (detached, semi, freehold townhouses) have historically been more stable and liquid in the GTA. Condos can be harder to sell in a slow market.
| Scenario | Buy starter home | Wait for bigger home |
|---|---|---|
| Planning to stay 5+ years | Strong case | Weaker case unless prices fall |
| Planning to stay under 3 years | Risky — transaction costs may exceed gain | Better case |
| Income expected to grow significantly | Buy now, upgrade later | Could work if growth is fast |
| Family size changing soon | Consider if starter fits short-term needs | Better to wait for right-size home |
| Rent significantly below ownership cost | Weaker case — gap is wide | Stronger case |
The GTA Starter Home Market in 2024–2025
In 2024 and into 2025, the GTA condo market has seen softness — prices have declined in certain segments, particularly for newer, smaller condos with high maintenance fees. Freehold starter homes — semi-detached and townhouses in the 905 and outer 416 — have held value better. For buyers considering a starter home, freehold options currently represent a more defensible choice than high-density condos in oversupplied buildings.
Check our guide on whether now is a good time to buy a home in the GTA for current market conditions, and see whether to buy before selling your current home if you already own property and are weighing a move-up purchase.
FAQ
Is a condo a good starter home in the GTA?
It can be, but condos carry more risk than freehold properties as a short-term holding. Condo prices in the GTA have been more volatile, supply has increased significantly, and maintenance fees reduce your net equity. If you buy a condo as a starter home, plan to hold for at least 5 years to reduce risk, and factor in monthly condo fees when comparing affordability to other property types.
How long should you stay in a starter home?
Most financial planners suggest holding for at least 5 years to give appreciation time to outpace transaction costs. In a strong appreciation environment, 3 years may be enough. Under 3 years, the math usually doesn't work unless you bought well below market or prices rose unusually fast. Plan your exit before you buy.
What makes a good starter home in the GTA?
Good starter homes hold value well, have broad buyer appeal, and can be sold relatively quickly in normal market conditions. Semi-detached homes, freehold townhouses, and two-bedroom condos in transit-accessible areas tend to outperform studio condos or properties with structural or location issues that limit the buyer pool.
What are the typical costs of selling a starter home in Ontario?
Selling a home in Ontario typically costs 3.5–5% of the sale price in real estate commissions, plus lawyer's fees ($1,000–$2,000), any repairs or staging costs, and moving expenses. On a $650,000 sale, that's roughly $23,000–$32,000. These costs must be offset by price appreciation and equity built through mortgage payments for the sale to be profitable.
Can I rent out a starter home if I don't want to sell?
Yes, though it has implications. Renting out a property that was your principal residence stops the clock on the principal residence exemption for those rental years. You'll also have rental income to report and potential capital gains exposure on the portion of years it was rented, calculated when you eventually sell. Talk to an accountant before converting a starter home to a rental property.
Want to understand exactly how much house you can buy? Start with how much house you can afford, then explore how long it takes to buy a home in the GTA to set realistic expectations for your timeline.