The labour isn't really cheaper. Tons of guys working in Toronto are coming in from Hamilton and Niagara Falls. And most of the building trades are covered under provincial agreements anyway
input costs are lower outside of Toronto on basically all fronts except materials and labour, but even those are a bit cheaper, from my understanding.
The big "savings" come from lower land, approvals, and especially government costs. Development Charges tend to be a lot lower, especially if you are outside of the inner 905/416.
Hamilton for example has a DC charge of $38,000 for a 2-bed apartment in the central city, versus $56,000 for Toronto. PLUS - Hamilton gives a 40% discount on those fees in the downtown - so the actual comparable is $22,000 vs. $56,000. Hamilton also has as-of-right zoning so the approvals process takes about half as long ($$$$) and historically didn't ask for Section 37 funds (millions of dollars).
Then you get much lower land costs to the tune of probably over a hundred dollars a buildable square foot.
Then you get lower construction costs through reduced development standards - no green standards, no requirements for various things like green roofs, excessive stepbacks, public art, POPs spaces, etc...
The list goes on..
The result is that you can build profitably in Hamilton for probably $800-$900 a foot vs. Toronto where it's closer to $1,400-$1,500 a foot from my understanding. The problem is that even with that discount, there often isn't a massive market of people willing to pay $900 a foot to live in Hamilton, and especially not to live in Niagara Falls where a $700,000, 750sf apartment sells at the same price as a townhouse with 3x the living space, a backyard, and a garage.
canada.constructconnect.com
