Cue the dinner party.
- “Danielle, how’s work going?”
- “Danielle, how is the housing market in Toronto?”
- “Danielle, how much is my house worth?”
- “Danielle, should I be worried?”
- “Danielle, when will the Toronto housing market recover?”
It’s a seemingly scary time right now for homeowners, but repeat after me, “It’s going to be OK.”
I’m going to monologue my Toronto housing market forecast: the same thing I did over Roasted Lamb and Lemon Potatoes, but with less wine and more stats.
What’s Happening Right Now?
You aren’t imagining it – the market is slow, historically slow, and volumes are historically low. Prices are correcting across most housing types, and new construction activity is slowing dramatically.
However, beneath the surface, the market is not collapsing — it’s actually rebalancing after the most aggressive housing expansion in Canadian history between 2020 and 2022.
For buyers, investors, and homeowners, 2026 will likely be remembered as the last year of “HELL”; one where the market resets before the next growth cycle begins.
Demand
If we’re going to talk about the GTA Real Estate Market, we’re going to have to talk about demand.
The most striking statistic in early 2026 is just how quiet the market has become.
Sales volumes across the GTA are at their lowest level in roughly 25 years and remain about 33% below the long-term 10-year average. Four factors are contributing to this slowdown:
Economic Uncertainty
Canada’s economy has cooled significantly following aggressive interest-rate hikes in 2022 and 2023. Consumer confidence remains fragile, particularly in major purchase categories like housing.
Compounding this uncertainty are global trade tensions with the United States, which have introduced risk to Canadian exports and business investment.
Labour Market Softness
The labour market, while still relatively healthy, is showing signs of fatigue. Hiring has slowed, and wage growth has stabilized. When households feel uncertain about job security, they tend to delay major financial decisions — including buying a home.
Interest Rates Have Plateaued
The Bank of Canada currently sits around 2.25%, and markets expect rates to remain relatively flat through much of 2026.
While rates are no longer rising, buyers are still adjusting psychologically to borrowing costs that are significantly higher than during the pandemic era.
In other words, the market is waiting for confidence to return.
Pent-up Demand is Quietly Building
Despite weak sales, there is a large pool of potential buyers waiting on the sidelines:
- First-time buyers priced out since 2022
- Immigrants and new households forming in the GTA
- Existing homeowners waiting to upgrade
If interest rates ease or economic confidence improves even modestly, this latent demand could return quickly in the second half of 2026.
Price Correcting
Yes, the prices were high, absolutely no one should have been paying 1.2M on the crappy part of Gerrard for a beat up semi – but they were. We lost sight of value for a few years.
Price declines began in 2022 and have continued gradually into 2026. As of January 2026, the GTA average home price sits around $973,289, representing:
- 6.5% decline year-over-year
- Roughly 22% below peak levels from 2022
However, the correction is not uniform across housing types.
Condos
The condo market has become the most oversupplied segment of the market. Prices have dropped roughly 10% year-over-year, and inventory levels have climbed to nearly 8 months of supply, which is extremely high by Toronto standards.
This weakness reflects a combination of factors:
- Investors exiting under higher interest rates
- A surge of newly completed units are hitting the market
- Declining investor appetite for pre-construction
Homes
Detached homes, semis, and townhouses have also declined, but remain structurally tighter markets. Prices in many 905 suburbs are 7–12% below last year, placing them roughly at six-year price levels.
However, family housing still benefits from strong underlying demand due to:
- Household formation
- Limited long-term supply of low-rise homes
- The desire for more space post-pandemic
Most economists expect GTA prices to continue drifting lower through the first half of 2026, followed by stabilization toward the end of the year and a modest recovery in 2027.
Inventory
One of the clearest signals that the market has shifted toward buyers is the surge in available listings. During the peak of 2021-2022, we were looking at less than 1 month’s inventory in certain micro markets.
I would have to take buyers to a property with the agreement already signed and a cheque in hand if they wanted a shot at purchasing it. Now, months of supply have climbed to levels we haven’t seen in a decade. As of last month’s stats, we are sitting at 7.8 Months for condos, 5.6 Months for Detached homes and 4.3 months for smaller homes.
In real estate terms, anything above 4 months of supply typically signals a buyer-favoured market. But what’s the driving force?
Investor Selling
No investor wants to lose money each month on a property they don’t live in. Toronto’s investors have had to deal with declining rents, increased interest rates and falling values – it’s a loss for them at the moment.
New Construction Completions
Thousands of units that were sold in the Toronto housing market during the pre-construction boom years are now being completed and entering the resale or rental market. But this is temporarily supporting supply. Read on to find out why this is going to do a 180 in two years.
Mortgage Renewals
Many homeowners are renewing their mortgages at higher interest rates. They’re going from 2% to 4%, and on a million-dollar mortgage, that’s an extra $1100/month.
While most households remain financially stable, some have to sell, especially if their jobs have been compromised or replaced with AI.
Learn more about selling and buying with a top Toronto real estate agent with these posts next:
- Video: What to Look For When Hiring a Toronto Real Estate Agent
- Do You Have a Toronto Real Estate Agent?
- What Does TRESA Mean to a Toronto Realtor
Affordability
Affordability is relative to your spending and what “house poor” looks like to you.
It’s funny, I’ve got couples making a combined $300k a year who are renting because they can’t “afford” to buy. But I’ve also got couples making $300k that can’t afford to live in the homes they own.
Mortgage payments as a percentage of income are still significantly higher than they were over the last 40 years.
Here’s what that looks like.
- 1980s: 25%
- 2000s: 30 to 37%
- 2020s: 48 to 55% – even 60% in certain Toronto neighbourhoods
Entry Level Condos
When I have a seller asking me how we’re going to sell their place, I let them know it’s a two-part process.
- We need to reno/design/stage it better than anything else on the market
- We need to price it at 2018 prices. That’s where we are in 2018 in most cases. My team is working with a handful of younger buyers looking in the $450-500k range. Buyers in this segment have choice and leverage.
Entry Level Homes
Homes under $900,000 are also attracting attention, especially in suburban markets.
Government policy changes are providing modest support for affordability:
- Insured mortgage limit increased to $1.5 million
- Extended amortization options for some borrowers
These measures will not dramatically transform affordability but may help bring marginal buyers back into the market.
New Construction Sales Are Dead
From 2018 to 2022, I couldn’t get my hands on any pre-construction unit allocations I wanted. The builders always had their preferred agents, and the pricing was astronomical. Today, salespeople at pre-construction projects are calling me, asking me to dinner, offering me 5% and bringing their prices down to 2019 pricing – they still can’t sell them.
Perhaps the most significant structural shift happening right now is in the new construction pipeline.
Pre-construction condo sales have collapsed to levels that make many projects financially unviable.
As a result:
- Condo starts are expected to fall sharply through 2026
- Development land transactions have slowed dramatically
- Some planned projects are being delayed or cancelled
This slowdown will reduce housing supply in the GTA several years from now, and I’m going to predict it sets the stage for our next housing shortage.
Purpose Built Rentals
Fitzroy is King right now. Purpose-built rental projects continue to move forward due to:
- Institutional investment capital
- Government incentives
- Strong long-term rental demand
Many developers are pivoting away from condos toward rental buildings. Who wouldn’t want to sign up for an amazing new building in a choice neighbourhood that has dependable rents, a co-working space, free first month’s rent, a doggy daycare?… The PBR market is HOT right now – and I’m here for it.
I predict that we see more and more of these in the next decade as people accept their renter-for-life path. Many younger people feel nomadic and a PBR is a great alternative to owning when you don’t plan on having kids & have no need for a backyard.
A Cooling But Stable Market
Toronto’s rental market has also begun to soften after several years of extreme rent growth.
Vacancy rates have increased modestly due to:
- New rental supply entering the market
- Slower population growth compared to the post-pandemic surge
- Tenants doubling up to reduce costs
Rent growth has slowed, particularly for new leases, though rents remain historically high. Importantly, economists do not see widespread landlord distress. Most landlords remain financially stable, and the rental market continues to benefit from strong long-term fundamentals, including immigration and limited housing supply.
My Final Thoughts
It’s easy to read the headlines and make assumptions. You can’t truly understand the energy and motives amongst people unless you’re standing beside them. I’m out there every day with clients in all segments of the market.
Buyers who want deals and are motivated by “the last year of affordable housing” and sellers who know they’re taking a hit from 2021 but want to move on anyway. I’ve got investors looking for deals, renters who are opting for PBRs and those who are “waiting for the bottom”.
The bottom is likely between now and September, and different micro markets will behave differently. A condo in Fort York is going to take 50 showings to sell. A home in Moore Park is going to take 5.
One topic we didn’t touch on was the gradual transfer of wealth. An enormous amount of money is being transferred down to 40-50-year-olds who will use it to invest, move up and pay off their giant mortgages.
So when people ask me, “How’s the housing market in Toronto, Danielle?” I say, “Well, it depends on who you are.”
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