Toronto home sales down 11.2% year-over-year

Toronto Housing Market Update - 2025/2026 Analysis

Key Concepts:

• Toronto Regional Real Estate Board (TRREB): The primary real estate board for the Greater Toronto Area, providing market analysis and data.
• Home Price Index (HPI): A measure of the typical price of residential properties, adjusted for seasonal variations and property characteristics.
• Non-Permanent Migrants: Individuals residing in Canada for a limited period, such as students or temporary workers.
• Affordability: The ability of households to purchase housing based on income, borrowing costs, and property prices.
• Inventory Levels: The number of properties available for sale in the market.
• Condo Apartment Segment: Specifically refers to the market for condominium apartments, often driven by investment.

1. Market Performance & Decline in Sales

The Toronto housing market experienced a decline in 2025, with home sales down 11.2% compared to 2024, as reported by the Toronto Regional Real Estate Board (TRREB). Despite an improvement in affordability due to lower borrowing costs and selling prices across most market segments, sales did not increase as expected. This is attributed to a lack of confidence among potential homebuyers, influenced by economic uncertainties, particularly regarding trade relationships and broader economic conditions. The average price overall in 2025 was down approximately 5% compared to 2024, reflected in both the average price and the Home Price Index (HPI). Increased inventory levels contributed to this price reduction, giving buyers more negotiating power.

2. Condo Market Dynamics & Investor Behavior

The condo apartment segment has been significantly impacted by investment activity. Investors, often acting as wholesalers, purchase units off-plan with the intention of selling or renting upon completion. However, an increased supply in the rental market has led to lower rental rates and increased negotiating power for renters. This has prompted some investors to list their units for sale, further contributing to the rise in inventory. This increased supply is potentially beneficial for first-time homebuyers.

3. First-Time Homebuyers & Affordability

First-time homebuyers represent a potential driver of market recovery in 2026. They are particularly sensitive to interest rates and rely heavily on affordability calculations. The improved affordability, coupled with positive developments in employment and trade, could encourage more first-time buyers to enter the market. The changing calculus for renters – the ability to negotiate better rental deals – is also influencing the decision-making process, with some potential buyers opting to delay purchase.

4. Immigration & Population Impact

Immigration patterns have played a role in the market. A decrease in non-permanent migrants (students, temporary workers) at the end of the year impacted the rental market due to reduced demand. While permanent migrants continue to arrive, primarily focusing on the Greater Toronto Area (GTA) for job opportunities and cultural diversity, their initial preference for renting delays their entry into the homeownership market by approximately five to seven years.

5. Regional Comparisons & National Trends

The Toronto and Vancouver markets are experiencing different conditions compared to other parts of Canada. Alberta, for example, has seen tighter market conditions with higher demand relative to inventory. This highlights the localized nature of the Canadian housing market.

6. Forecast for 2026 & Key Indicators

TRREB anticipates a “year of two halves” for 2026. The first half is expected to remain relatively unchanged, with limited movement in borrowing costs and continued economic uncertainty. However, if trade relationships with the U.S. stabilize and major infrastructure projects gain momentum, increased confidence and market activity could emerge in the second half of the year. The biggest concern for many in Southern Ontario is the state of trade with the United States, as many jobs are connected to this relationship. Broader geopolitical issues also contribute to overall uncertainty.

7. Step-by-Step Considerations for Market Recovery

1. Economic Stabilization: Positive developments in trade relationships and infrastructure projects are crucial for boosting confidence.
2. Interest Rate Stability: Maintaining stable borrowing costs is essential for affordability.
3. Inventory Management: A balanced inventory level will provide choice for buyers without excessive downward pressure on prices.
4. Immigration Trends: Continued influx of permanent migrants will contribute to long-term demand.
5. First-Time Buyer Support: Policies and initiatives aimed at assisting first-time homebuyers can stimulate market activity.

8. Notable Quotes

• Jason Mercer (TRREB Chief Information Officer): “I think there's a lot of households that are just sort of waiting to see what their economic fortunes look like, what their job situation looks like as we move through 2026.”
• Jason Mercer: “The calculus has changed for for renter households are saying look at I can negotiate a better deal either with my current landlord or on a on a different unit.”

9. Data & Statistics

• Sales Decline: 11.2% decrease in home sales in 2025 compared to 2024.
• Price Decline: Approximately 5% decrease in average home prices in 2025 compared to 2024.
• Rental Market: Increased supply in the rental market leading to lower rental rates.
• Immigration Impact: A decrease in non-permanent migrants impacted rental demand.

Conclusion:

The Toronto housing market is currently navigating a period of adjustment characterized by declining sales, increased inventory, and economic uncertainty. While affordability has improved, a lack of confidence among potential buyers is hindering a full recovery. The condo market is particularly sensitive to investor behavior and rental market dynamics. The outlook for 2026 is cautiously optimistic, with the potential for a rebound in the second half of the year contingent on positive developments in trade, infrastructure, and overall economic stability. The market’s future trajectory will depend on a complex interplay of factors, including interest rates, immigration patterns, and the confidence of both buyers and sellers.