The Greater Toronto Area (GTA) real estate market started 2025 with a moderate increase in sales activity (MoM), reflecting improved affordability due to declining interest rates. However, potential economic turbulence, including U.S. tariff threats and broader global uncertainties, could impact investment decisions. For real estate investors and sellers, understanding these dynamics is crucial to maximizing returns and minimizing risks.
Buyer’s Market Now, Growth Ahead – New listings surged 48.6% YoY, pushing inventory up 70%, but declining housing starts signalling future supply shortages, setting up long-term price gains.
Sales & Prices in Transition – Sales fell 7.9% YoY, but prices rose 1.5% YoY. Condos are under pressure, while detached homes are set to rebound as rates drop.
Rate Cuts Fuel Demand – The Bank of Canada lowered rates, with more cuts expected. Lower borrowing costs will drive buyers back, making early 2025 a key time to buy and invest.
Tariffs Add Uncertainty – U.S. tariffs could raise construction costs driving up the cost of housing further, but rate cuts will likely offset major economic impacts.
Investor Strategy – Buy before demand surges, take advantage of affordability gaps, and explore rental investments with MLI Select incentives.
Seller Strategy – With longer days on the market, pricing competitively, staging, and timing listings for the spring market are key to faster sales.
Bottom Line
The GTA market is shifting, but long-term fundamentals remain strong. In the last few months, prices have dropped and condo investors have gone through a difficult time (including myself!), historical data shows that over a long period, real estate prices always go up! In the last 45 years, GTA real estate has seen 6.27% compounded growth.
Real estate investment has never been about timing the market; it is always about time in the market. While the term HODL, might have been popularized in the context of crypto, it very much applies to real estate as well.
Sellers who want to exit because property values are down will be kicking themselves in a few years when the market has picked back up.
Purchasers who act now can get in at low prices and maximize future gains.
The Toronto housing market has definitively shifted into a buyer’s market in early 2025, as a surge in new listings outpaced demand. Sales declined year-over-year by 8%, with condo transactions experiencing the steepest drop. Meanwhile, new listings spiked by 49% YoY, reaching levels not seen since 2009, contributing to a 70% increase in active inventory across the GTA.
This influx of supply has softened price growth, with the seasonally adjusted average home price declining by 2.1% month-over-month, marking the sixth drop in the past seven months. While detached home prices have held relatively stable, the condo segment has faced significant downward pressure due to record-high listings but we expect the worst to be behind us now.
It is also not uncommon for prices to dip month over month during the holiday & cold season
The sales-to-new listings ratio, a key indicator of market balance, has dropped to its lowest level since the 2008 financial crisis, reinforcing the growing leverage for buyers.
However, TRREB forecasts that price stabilization could emerge in the latter half of 2025, as demand gradually returns and mortgage rates decline. The detached home segment is expected to see the strongest rebound as borrowing costs ease and pent-up demand re-emerges.
Recent U.S. tariff discussions have created economic uncertainty in Canada, with potential ripple effects on real estate. If tariffs remain, higher construction costs could worsen the housing supply shortage, driving up prices and rents. Job losses in trade-sensitive industries may also weaken buyer confidence, slowing home sales.
However, economists expect the Bank of Canada to lower rates to counteract economic weakness. This could boost housing demand by making borrowing more affordable. The coming months will be crucial—if rate cuts materialize, they may help stabilize the market, even as tariffs push costs higher.
Recent Edge Analytics insights suggest that U.S. tariff threats may be less severe than initially feared. While there is a possibility of a 10% tariff on manufactured goods later in 2025, the impact on the GTA housing market is expected to be limited. Lower rates from the Bank of Canada could offset potential economic strain, maintaining stability in real estate investment.
January saw a sharp increase in new listings across major metros, including Toronto, where new listings spiked 26% month-over-month and 49% year-over-year.
Despite this surge in new listings that has made 2025 a buyer’s market, housing starts are declining as developers scale back due to lack of investor activity in the last couple of years. While this increase in supply is putting pressure on home prices today, fewer new homes in the pipeline will tighten inventory in the coming years.
For investors, this presents a key opportunity—short-term softness means buying at a discount, while lower future supply is expected to drive strong price appreciation once demand rebounds. As interest rates decline and supply constraints grow, todeay’s buyers could see significant long-term gains.
The Bank of Canada has continued easing monetary policy, with rate cuts anticipated throughout 2025. As borrowing costs decline, sidelined buyers—especially first-time homeowners—are expected to re-enter the market, pushing sales volume higher.
Investor Takeaway: As interest rates continue to decline, more buyers will re-enter the market, driving prices higher. Buyers who act now can secure properties at lower prices before appreciation accelerates. Additionally, with falling rates, money in savings accounts will yield lower returns, making real estate a more attractive and stable investment option for long-term growth.
Looking back at the GTA real estate market over the past two decades, similar trends have emerged in periods of declining interest rates:
A key takeaway from historical data is that when interest rates decline, demand rebounds quickly, leading to increased competition and price acceleration. Investors who act early benefit from long-term appreciation. The current market setup mirrors these past trends, reinforcing the urgency for buyers to secure properties before competition intensifies.
The MLI Select program is gaining traction as a key policy tool to encourage investment in purpose-built rental properties. This initiative provides favorable financing terms for investors who focus on affordability, energy efficiency, and accessibility, making it an attractive opportunity for those looking to expand their real estate portfolios.
Investor Takeaway: Investors who align their projects with MLI Select's affordability and sustainability criteria can benefit from lower financing costs while contributing to the growing demand for rental housing in the GTA.
The affordability gap between Toronto’s core (416) and surrounding suburban markets (905) has decreased significantly from December 2024 to January 2025–from $102,833 to $57,107.
If this trend continues, this will eventually push more buyers to Toronto.
✅ Act Before Prices Surge: Market history shows that once rate cuts begin, demand accelerates rapidly.
✅ Capitalize on Affordability Gaps: The narrowing price gap between condos and detached homes suggests undervaluation in certain segments.
✅ Leverage Rental Investments: With tight rental supply, rental yields remain strong. MLI Select financing makes purpose-built rentals a lucrative option.
🏡 Prepare for Extended DOM: The average DOM is now 54 days, meaning homes are staying on the market longer. Pricing competitively is key to faster sales.
🏡 Strategic Pricing Wins: Overpricing leads to prolonged listings and potential price reductions.
🏡 Target High-Demand Segments: Entry-level detached homes and townhouses continue to attract motivated buyers. If you have a portfolio of properties, choosing which properties to list now strategically, will go a long way
🏡 Optimize for Multiple Offers: With rising inventory, staging, minor renovations, and strategic marketing are more important than ever.
🏡 Spring Market Advantage: Q2 & Q3 2025 are expected to see a boost in buyer activity, making it an ideal listing period.
The GTA real estate market is positioned for steady growth in 2025, but the landscape is shifting. Buyers are gaining more power, yet demand remains resilient.
For investors, holding on for long term will be key to higher gains. For sellers, preparation, strategic pricing, and optimizing market timing will determine success.
Want to discuss how to position yourself for success? Let’s connect and build your real estate strategy for 2025!
