Royal LePage Forecasts 4.5% Drop in Toronto Home Prices by Year-End

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  House and Home on Tue, Dec 09th, 2025 by Toronto Star
      Locale: CANADA

Royal LePage Projects a 4.5 % Drop in Toronto Home Prices by Year‑End – What It Means for Buyers, Sellers and the Economy

A new forecast from Royal LePage, one of Canada’s oldest and most respected real‑estate firms, signals a modest decline in residential property values across the Greater Toronto Area (GTA) by the end of 2024. According to the firm’s “Royal LePage Real‑Estate Outlook 2024” report – linked within the Toronto Star article – home prices are expected to fall by 4.5 % from their July peak. This projection follows a brief period of price stability and marks the first serious downside signal in a market that has long been celebrated for its rapid growth.

How Royal LePage Built Its Forecast

Royal LePage’s analysis is grounded in a mix of quantitative data and qualitative insight. The company’s research team used the latest housing‑market metrics supplied by the Canadian Mortgage and Housing Corporation (CMHC) and the Canadian Real‑Estate Association (CREA). These include:

• Median sales price and price‑per‑square‑foot data from the Toronto and Region Real‑Estate Board (TRREB).
• Mortgage‑originations and interest‑rate trends pulled from the Bank of Canada’s policy announcements and the Toronto‑based mortgage‑lending industry.
• Construction pipeline and inventory levels derived from the TRREB’s monthly supply‑demand dashboard and provincial building‑permit data.

The core of the model is a regression framework that correlates price movements with interest‑rate changes, inflation, and supply‑side pressures. The report notes that a 25‑basis‑point rise in the overnight policy rate (the benchmark for mortgage rates) has historically produced a 1‑3 % decline in sales prices. Coupled with the current 3‑month Canada Mortgage and Housing Corporation “affordability index” – which has slipped below 1.2, signaling that buyers now face higher debt‑service ratios – the model indicates that the market is primed for a small correction.

Why the Drop Is Expected in 2024, Not 2025

Royal LePage’s projection specifically targets the remainder of 2024 because the policy‑rate hike cycle is largely complete. The Bank of Canada’s last rate increase, which took place in February, lifted the overnight rate to 5.25 %. The forecast acknowledges that mortgage rates are still elevated relative to the last decade, and that borrowers who entered the market in late 2023 will feel the pinch sooner than those who financed in 2022.

Moreover, the firm points out that the supply side is likely to remain constrained for the near term. In 2023, the TRREB’s “Housing Supply” report indicated that new construction permits lagged by 15 % compared to the previous year, a trend that has been exacerbated by zoning changes and the 2020‑21 pandemic‑related slowdown. This supply shortfall, combined with the higher borrowing costs, creates a perfect storm for a mild price correction.

Impact on Buyers, Sellers, and the Wider Economy

Buyers: For first‑time homebuyers, a 4.5 % drop may seem modest, but when combined with the current high mortgage‑rate environment, it could translate into significant savings. The report suggests that a 4 % reduction in home price is roughly equivalent to a 2.5 % reduction in monthly mortgage payment on a $700,000 property at a 5 % interest rate.

Sellers: Homeowners who listed in 2023 can expect a slightly lower selling price if they remain on the market until late 2024. However, the analysis advises that sellers remain patient, noting that inventory is still low enough that many transactions will close at or near the current market value. Sellers who are price‑sensitive may consider adjusting their asking price by 2–3 % to keep the property competitive.

The Economy: A slight dip in home prices could help temper the overheating in the real‑estate sector, easing affordability concerns that have strained the Toronto housing market. This, in turn, may ease pressure on the broader financial system, as lower home prices reduce the risk of negative equity for mortgage holders. Royal LePage also notes that the forecast does not imply a broader economic downturn; the real‑estate sector is still operating within a solid macro‑economic environment – with employment rates in the GTA near 95 % and household income growth outpacing inflation.

Comparison with Other Canadian Cities

The Toronto Star article links to Royal LePage’s “National Housing Market Outlook” PDF, which highlights that the GTA’s price decline is sharper than in most other Canadian metros. For instance:

• Vancouver – Prices are projected to dip 2.3 %.
• Montreal – A modest 1.1 % decline is expected.
• Ottawa – Prices could rise slightly (0.5 %) due to strong government‑sector demand.

These differences underscore the unique dynamics in Toronto, where high foreign‑investment demand, limited land supply, and a dense, urban environment create a higher baseline for price volatility.

Key Takeaways from the Article

1. Royal LePage expects a 4.5 % price decline in the GTA by year‑end.
2. The forecast is built on a data‑driven model that incorporates mortgage‑rate trends, construction supply data, and historical price sensitivity to interest rates.
3. The drop is modest and largely confined to the GTA; other major Canadian markets face smaller declines or even slight gains.
4. Buyers may benefit from lower prices, especially those who have already been burdened by high mortgage rates.
5. Sellers should monitor market conditions closely but expect that inventory remains tight enough to maintain competitive prices.
6. The forecast has broader implications for affordability and the housing‑financing ecosystem, potentially easing negative‑equity risk and tightening the real‑estate bubble.

A Final Word

The Toronto Star article is not a headline‑hounding prediction of a market crash; rather, it is a nuanced forecast that reflects the current realities of a mature, high‑value real‑estate market. Royal LePage’s analysis reminds buyers and sellers alike that price movements, while inevitable, need not be catastrophic. Instead, they are part of the cyclical adjustment that ensures the GTA’s housing market remains sustainable and accessible – albeit at a slightly lower level than the current peak.