Toronto’s Housing Market Weathers a Perfect Storm
Economic uncertainty and shifting supply-demand dynamics test the property market.
Spring Thaw Brings Little Relief
As cherry blossoms bloomed across Toronto in April 2025, the city’s once-booming housing market remains locked in a frosty stalemate.
A cocktail of economic anxieties—from simmering U.S. trade tensions to cooling population growth—has left buyers and sellers in a wary standoff.
March sales data from the Toronto Regional Real Estate Board (TRREB) laid bare the strain: transactions fell 22% year-over-year, marking the weakest first quarter in a decade.
The figures underscore a paradox at the heart of Canada’s largest city. Mortgage rates have retreated from their 2023 peaks—settling at 4.4% for fixed five-year terms—providing relief for borrowers.
Prices have dropped 12% from the 2022 peak, and demand remains stubbornly muted.
“The math of homeownership has improved, but the psychology hasn’t,” observed TRREB President Elechia Barry-Sproule. “Until households feel secure in their jobs and the broader economy, we’re stuck in this holding pattern.”
Anatomy of a Slowdown
The roots of Toronto’s malaise stretch beyond cyclical headwinds. Ontario’s population growth, which surged at a 3.1% annual clip during the early 2020s immigration boom, has slumped to its lowest level since 2015.
Ontario Population Growth April 2025
This demographic cooldown, mirrored in British Columbia but absent in resource-rich Alberta, has sapped demand for rental units and starter homes alike. Meanwhile, the ongoing trade war with the U.S.—has cast a pall over Ontario’s industrial heartland. Toronto’s unemployment rate held steady at 8.4% in March.
The Knock-on Effects
While the Bank of Canada’s rate cuts have provided some relief, borrowing costs remain nearly double their pandemic-era lows. A typical Toronto detached house buyer household would need to dedicate almost 80% of its income to mortgage payments on a median-priced home. Affordability has improved, but not enough to make much difference.
The erosion of price expectations further complicates matters. A March survey by Nanos Research found only 34% of Canadians anticipate home values rising in the next year—a very gloomy outlook.
Canadian Consumer Confidence in Real Estate
“When people stop viewing real estate as a surefire investment, they become hyper-sensitive to short-term risks,” noted University of Toronto urban economist Dr. Lila Varma. “That’s why even modest trade war headlines can paralyze decision-making.”
Supply-Side Puzzles
Cranes dot the skyline from Scarborough to Mississauga, with nearly 100,000 units under construction. Yet this pipeline of new inventory has yet to translate into buyer-friendly conditions.
Active listings tell a curious tale. Despite weak sales, March saw a 22% monthly drop in available properties as skittish sellers yanked homes off the market.
The ratio of active listings to sales tightened to 3 months of inventory, technically tilting leverage toward a sellers’ market. But it is likely not a true seller’s market—opportunistic sellers have left the marketplace, and only motivated sellers remain. It’s a motivated seller’s market. Anyone listing now is either relocating or needs liquidity. That creates opportunities for buyers willing to negotiate.
Shadow inventory looms as a wild card. All those units that were for sale earlier this year are waiting for the right time to return to the market. At the same time, developer inventory is backing up. These “ghost listings” are intended for the market, but they simply haven’t been released yet. Should confidence rebound, these listings could flood back. For now, the standoff persists: buyers await steeper discounts; sellers cling to pandemic-era price memories.
Cautious Optimism
The path forward hinges on risks beyond realtors’ control. While TRREB forecasts 2.6% average sale price growth in 2025, this optimism assumes détente in Washington. A full-blown prolonged U.S. trade war would hammer the manufacturing and tech sectors that buoy Toronto’s economy.
