Downsizing from a detached house to a townhouse in the GTA can free up a large amount of equity: in September 2026, TRREB’s benchmark for a detached home in the City of Toronto was $1,417,600, against $714,700 for a townhouse. In our worked example, selling a $1.4 million house and buying a $715,000 Toronto townhouse releases about $590,000 after selling costs and land transfer tax. The key decisions are the type of townhouse (stairs and fees matter more at this stage), whether to buy new and use the enhanced HST rebate, and whether to sell or buy first.
Key takeaways
- The detached-to-townhouse gap was about $703,000 in Toronto and $528,000 across the GTA on September 2026 benchmarks.
- Selling costs and land transfer tax take a meaningful share, so budget them before you count the equity.
- Look for main-floor primary bedrooms or bungalow-style townhouses if stairs are a concern.
- Downsizers buying a new townhouse as a primary residence can qualify for Ontario’s enhanced HST rebate if they sign by March 31, 2027.
- The gain on your principal residence is generally tax-free, but the sale must still be reported on your tax return.
How much equity does downsizing to a townhouse free up?
The gap between detached homes and townhouses is the reason downsizing works financially. Here are the September 2026 benchmarks from TRREB’s MLS HPI tables.
| Area | Detached benchmark | Townhouse benchmark | Gap |
|---|---|---|---|
| City of Toronto | $1,417,600 | $714,700 | $702,900 |
| All TRREB areas | $1,196,400 | $668,800 | $527,600 |
| Oakville | $1,573,000 | $700,000 | $873,000 |
| Markham | $1,441,700 | $731,700 | $710,000 |
| Burlington | $1,182,500 | $661,200 | $521,300 |
These are typical homes, not yours. A well-kept detached house on a large lot can sell well above its area benchmark, and a luxury townhouse with a main-floor primary suite can cost far more than the townhouse benchmark.
A worked example: selling a $1.4 million house
Assume you own a detached house in Toronto worth about $1,400,000, mortgage-free. These assumptions are labelled for you to adjust.
| Item | Buy in Toronto | Buy in Oakville |
|---|---|---|
| Sale price | $1,400,000 | $1,400,000 |
| Commission at 4% plus HST (illustration; negotiable) | −$63,280 | −$63,280 |
| Legal and moving (assumption) | −$8,000 | −$8,000 |
| Townhouse price | −$715,000 | −$700,000 |
| Land transfer tax | −$21,550 | −$10,475 |
| Equity freed | about $592,170 | about $618,245 |
As a repeat buyer, you pay full land transfer tax, and in Toronto you pay it twice. Our land transfer tax guide shows the brackets. On the selling side, our home value estimate and seller’s guide help you plan.
Which townhouse suits a downsizer?
Most townhouses are built for young families, with three storeys and bedrooms upstairs. That is not always what a downsizer needs. Focus on layout before price.
Look for
- Main-floor primary bedroom: some townhouse communities, often marketed as bungalow townhouses, put the primary suite on the main floor.
- Fewer stairs to daily rooms: a kitchen and living room at grade, not up a flight from the garage.
- A garage with interior entry: carrying groceries in the rain matters more than it used to.
- Low-maintenance tenure: a condo townhouse where the corporation handles the roof, exterior and snow can make sense for people who want to travel.
Be cautious with
- Three-storey back-to-backs and upper stacked units, which can mean several flights to reach the bedroom.
- Older complexes with weak reserve funds, where a special assessment could land just after you move in. Our reserve fund checklist covers this.
Tip: Walk the full route from the car to the bedroom and the laundry at every showing, carrying a bag of groceries. It is the quickest way to judge whether a townhouse will still suit you in ten years. If the laundry is in the basement and the primary bedroom is two floors up, that is three flights per load.
Buying a new townhouse: the HST rebate for downsizers
This year brings a real advantage for downsizers who want a new home. Ontario’s enhanced new housing rebate, for agreements signed from April 1, 2026 to March 31, 2027, removes up to $130,000 of HST on a new home bought as a primary residence. Unlike the first-time buyer programs, it is open to people who have owned before.
On an $899,900 new townhouse, the 13% HST is $116,987, and the enhanced rebate can cover all of it. Before this program, a repeat buyer could usually claim only up to $24,000. Our post on the Ontario HST rebate for new townhouses explains how it is credited, and why you should check how the builder’s price treats it.
New homes also come with Tarion’s warranty, and since a new freehold or POTL purchase requires notice to Tarion within 45 days of signing to get full deposit protection, put that on your list.
Sell first or buy first when downsizing?
Buying first lets you move once, on your own schedule. If the townhouse closes before your house does, ask your lender about bridge financing, which is usually offered once your sale is firm. The risk is owning two homes if the house takes longer to sell than expected.
The market favours a particular approach right now. Townhouses are in a buyer’s market, with condo townhouses selling at an average of 98% of list price in September and freehold townhouses at 100%. That gives you room to negotiate a long closing on the townhouse while you sell. Our post on selling in a buyer’s market covers pricing strategy that also applies to detached homes.
Taxes and paperwork to plan for
- Principal residence exemption: the gain on a home you designate as your principal residence is generally tax-free. Only one property per family unit can be designated per year, and every sale must be reported on Schedule 3 and Form T2091.
- Gifts to family: if you plan to give part of the freed equity to children for their down payment, talk to an accountant and a lawyer first.
- Estate planning: a move is a good moment to update your will and powers of attorney.
The CRA’s principal residence folio sets out the rules in detail.
Frequently asked questions
Is a townhouse a good option for downsizing?
It can be. A townhouse costs far less than a detached house in most of the GTA, often comes with less exterior work, and keeps you in a neighbourhood rather than a tower. The main drawback is stairs. Look for main-floor primary bedrooms or bungalow-style townhouses, and check the fee and reserve fund if it is a condo.
Do downsizers qualify for the new HST rebate on a townhouse?
Yes, if the conditions are met. Ontario’s enhanced new housing rebate is open to any eligible individual buying a new home from a builder as a primary residence, not only first-time buyers. The purchase agreement must be signed between April 1, 2026 and March 31, 2027. Rebates cover the full 13% HST up to $1 million and $130,000 up to $1.5 million.
Do I pay tax when I sell my house to downsize?
Usually not on the gain, if the house was your principal residence for every year you owned it and you designate it as such. You must still report the sale on Schedule 3 and Form T2091 with your tax return. If you also own a cottage or rental, the designation rules get more complex, so speak with an accountant.
Planning a downsize? Browse townhouses across the GTA, including Oakville and Burlington, or contact our team to plan the sale and purchase together.
This article is general information as of October 2026, not legal, tax, mortgage or financial advice. Rules and numbers change, so confirm the details for your situation with a licensed professional.