Toronto-area home sales tanked in 2025 and it’s unlikely the market will rebound any time soon as the city faces high unemployment and affordability challenges, economists say.
There were 62,433 sales last year, according to the Toronto Regional Real Estate Board (TRREB). The last time sales were this low was in 2000 with 60,783 sales, when the market resurfaced from the 1990s housing crash.
Toronto’s real estate market isn’t crashing but the low sales figure points to a number of pressures unique to the city, such as high unemployment, an ailing condo market as investors have jumped ship, and persistent affordability challenges, economists say. Because of this, Toronto’s housing correction will persist for the next 12 months.
“Demand has backed off, and most dramatically investors have completely left the market,” said Robert Kavcic, senior economist and director economics at BMO.
“Valuations got out of whack and it’s now unwinding, which is the multi-year adjustment we forecast back in 2022.”
GTA home prices ballooned by almost 50 per cent over two years at the start of the pandemic when interest rates were ultralow and investors dove into the market. But since interest rates rose, investors have deserted the market and average selling prices have dropped by more than 20 per cent since the February 2022 peak.
Investors, who piled into the preconstruction condo sector during pandemic-low interest rates, have since fled or are failing to close on units, and building has altogether stalled in the city as developers enter receivership or cancel projects.
“Speculative froth” leaving the market it will drive down prices and sales further, Kavcic said. “Condos will remain a tough market for the next year and it weighs on the market as a whole.”
Condos accounted for 26 per cent of sales in 2025, behind detached homes, which accounted for 45 per cent of sales, according to TRREB.
But even with investor activity diminishing, affordability remains a challenge.
The Bank of Canada has dropped its interest rate 2.75 percentage points since June 2024 (the central bank’s interest rate is now 2.25 per cent) improving variable-rate mortgages. Fixed-interest rates have also dropped since their peak but fluctuate as the bond market remains volatile due to economic instability.
Still, even with the decline in prices and interest rates, buying a property of more than $ 1 million with a low four per cent interest rates results in monthly mortgage payments of almost $5,000, based on a rough calculation that assumes a 20 per cent down payment. That doesn’t include property tax, utilities, insurance and maintenance.
“Affordability is better but actions are speaking loudly in terms of the low sales volume,” Kavcic said, adding that incomes, interest rates and house prices are evaluated when calculating affordability. House prices or interest rates need to come down further, or incomes need to rise higher.
But Toronto’s unemployment rate hit 8.4 per cent in November — higher than Ontario’s 7.3 per cent and the national average of 6.5 per cent, according to Statistics Canada.
Companies are cutting back on hiring, conserving spending and, depending on sector, reducing their workforce as trade tensions persist creating uneconomic uncertainty.
“When looking at the broader economy, based on statistics, we’re not in a recession,” said Robert Hogue, assistance chief economist at RBC. “But that doesn’t speak to the local realities and diverse experiences across Canada.”
The high unemployment rate in Toronto has a significant impact on potential homebuyers, who want to feel settled and stable in their jobs, Hogue said.
“It’s enough to make people hesitate before making a big financial decision,” he said.
