01/16/2026
Will 2026 be a turnaround year for Toronto real estate?
We may well remember 2025 as a year of big change and uncertainty. Most notable on the economic front is the concern about the trade and tariff tensions with our biggest trading partner, the United States.
This concern continues to loom large in Canadian minds. Understandably, folks feel real uncertainty about personal employment and income stability. As a result, the willingness to 'pull the trigger' in the real estate market declined noticeably last year. Buyers simply sat on their hands, nervous about what could lay ahead for their finances.
But in the face of good reasons to be nervous, there were (and continue to be) really good reasons to step up and buy, including the best mortgage affordability, selling prices, and inventory levels in the last four years. But none of that mattered last year.
The fear of buying resulted in a very weak 62,433 GTA home sales of all types, down by 11.2% compared to 2024, itself not a great year. The annual average selling price too was down by 4.7% compared to $1,120,241 in 2024. Both measures have been in a downtrend now since their peak in early 2022. The suppressed sales volume is particularly stark - 62,433 represents a sales pace that is now approximately 30% lower than the long-term annual GTA average. It's basically crickets out there.
So, what's ahead?
There is reason for some quiet optimism, particularly after we get past the upcoming review of the USMCA/CUSMA trade treaty and Canadians get more certainty about tariffs, and their potential job security.
Many leading economists are predicting a stronger housing market. Here's some of the silver linings that may drive it:
- Numerous Bank Of Canada cuts have chopped the key 'overnight' rate by more than half in just 18 months. This has put mortgages for most buyers now into the 4% range, well down from two years ago and a pretty normal level over the last twenty-five years. Mortgages look to stay about there for the near term at least. The earliest expected interest rate increase is end of 2026, if it happens at all.
- Canadian employment is a mixed picture, but it has been showing suprising resilience in the face of the tariff concerns. It's not a job explosion, but we are seeing a stabilization in the jobless rate. Jobs are not falling off a cliff.
- US economic growth looks very robust. One of the Federal Reserve branches is predicting GDP growth over 5% for the last quarter of 2025. At the same time, a 'Goldilocks' scenario may be at hand because US employment is on the soft side, and inflation is calm. This could allow for some more US interest rate cuts to stimulate hiring but without the risk of stoking inflation. Any US cuts could give Americans more money in their pockets to spend and that can't help but help Canada's exports and jobs.
Finally, three years of low-volume home sales are likely to 'revert to the mean' at some point. People are still getting married. People are still getting divorced. People are still moving to Toronto. Those and all the other normal things that drive real estate purchases are still happening. Purchases will have to follow at some point.
Will this be the year that buyers finally break down and commit? Will this be the year they stop waiting for further price declines?
Increasing tariff comfort could do it. As could any noticeable rise in selling prices or mortgage rates. Any of those three factors could see GTA buyers jumping over the boards and onto the ice...with offers in-hand.
If you're even curious about what your home may get in today's market, and want to know how to maximize your selling price, give me a call for a free, no-pressure market evaluation.
I'm here for you no matter what the market sends our way.
