N※N

Toronto Housing Market Ends 2025 Down: Prices and Sales Decline

68

  //house-home.news-articles.net/content/2026/01/0 .. ket-ends-2025-down-prices-and-sales-decline.html
  Published in House and Home on Wednesday, January 7th 2026 at 6:46 GMT by Bloomberg L.P.

• 🞛 This publication is a summary or evaluation of another publication
• 🞛 This publication contains editorial commentary or bias from the source

Toronto Housing Market Ends 2025 in the Red: A Year of Cooling and Caution

Toronto’s housing market concluded 2025 with a noticeable chill, marking a shift from the frenzied activity of previous years. Data released by the Toronto Regional Real Estate Board (TRREB) reveals both prices and sales declined throughout the year, a trend fueled by high interest rates, increased inventory, and a cautious consumer base. While not a “crash,” the market experienced a significant correction after the pandemic-era boom, leaving many to question the future trajectory of Canada's largest city’s real estate landscape.

The Bloomberg article, and subsequent reporting from TRREB, indicates that average home prices in the Greater Toronto Area (GTA) fell by approximately 6.5% in 2025. This marks the second consecutive year of price decline, albeit a less dramatic drop than the 12.8% decrease witnessed in 2024. The slowdown isn't uniform across all property types; the condo market proved more resilient than detached homes, with prices in some segments remaining relatively stable or experiencing only minor decreases. This is attributed to the increased affordability of condos compared to single-family dwellings, and a continued demand from first-time buyers and downsizers.

Sales volume also took a hit, down 11.5% year-over-year. The number of homes changing hands reached levels not seen since the early 2000s, signalling a significant reduction in activity. This drop wasn’t simply due to lower prices; the number of new listings also increased, providing buyers with more options and reducing the competitive pressure that characterized the peak of the market. The article points to a key dynamic: while inventory increased, it remained below historical averages, suggesting the market isn’t necessarily oversupplied, but rather normalizing after years of scarcity.

The Interest Rate Factor & Economic Headwinds

The primary driver behind the cooling market is undoubtedly the Bank of Canada’s aggressive interest rate hikes throughout 2022, 2023, and the first half of 2025. Initially intended to curb inflation, these increases significantly impacted mortgage affordability. Prospective homebuyers faced substantially higher monthly payments, effectively pricing many out of the market. Even existing homeowners with variable-rate mortgages experienced financial strain, leading to a reduction in discretionary spending and contributing to broader economic slowdown.

While the Bank of Canada did begin to cautiously lower rates towards the end of 2025 – a move widely anticipated throughout the year – the impact on the housing market was muted. This is because rates remain significantly higher than pre-pandemic levels, and many buyers are still hesitant to enter the market, anticipating further (though slower) rate decreases. Furthermore, the article notes that wider economic concerns, including persistent inflation in certain sectors and anxieties about a potential recession, have contributed to a general sense of caution among potential buyers. Job security and economic outlook are playing a larger role in purchasing decisions than they did during the pandemic’s ultra-low interest rate environment.

Regional Variations & The Impact on Different Buyer Groups

The decline in prices and sales wasn’t consistent across the GTA. The 905 region (the outer suburbs) saw steeper declines than the 416 region (the City of Toronto), reflecting a trend towards greater affordability in the periphery. The 416, despite experiencing a price drop, held more value due to limited land supply and the continued desirability of downtown living.

The market correction also impacted different buyer groups differently. First-time homebuyers, while still facing affordability challenges, benefitted from the increased inventory and negotiating power. Those looking to upgrade or move sideways faced a double whammy – lower equity in their current homes combined with the higher cost of financing. Investors, who fueled much of the market growth during the pandemic, have largely retreated, preferring to wait for more clarity on the economic outlook.

Looking Ahead to 2026: Cautious Optimism

Predicting the future of the Toronto housing market is notoriously difficult, but the Bloomberg article and related TRREB analysis suggest a more balanced market in 2026. While significant price increases are unlikely, a further dramatic decline is also not expected. The anticipated (albeit slow) continued reduction in interest rates is expected to provide some support to the market.

However, several factors remain uncertain. The pace of rate cuts will be crucial, as will the overall health of the Canadian economy. Increased immigration levels continue to add to housing demand, potentially offsetting some of the downward pressure on prices. Furthermore, government policies aimed at increasing housing supply – including efforts to streamline the development approval process and incentivize the construction of affordable housing – could also play a significant role.

Ultimately, the Toronto housing market has entered a new phase. The era of rapid price growth is over, at least for the foreseeable future. The market is now characterized by greater balance, increased caution, and a renewed focus on fundamental factors such as affordability, economic stability, and long-term value. Buyers and sellers alike will need to navigate this new landscape with patience and a realistic assessment of market conditions.