Toronto-area home prices are forecast to increase by five per cent year over year at the end of 2025 with detached single-family homes leading the way while condos units struggle to regain footing after a tumultuous year, according to a leading realty company.
By the fourth quarter of 2025, the aggregate home price in the GTA will be $1.22 million, up from the current $1.16 million, Royal LePage predicted in its 2025 market survey forecast.
Single-family detached homes will see a seven per cent increase while condo prices will dip by one per cent.
When the Bank of Canada began making interest rate cuts in June, sidelined buyers continued to wait for prices to reach the bottom, said Shawn Zigelstein, broker and leader of Team Zold, Royal LePage Your Community Realty.
But following the supersized rate cut made in October of 0.5 percentage points, “the tide began to turn and activity picked up materially,” he added.
“This momentum is expected to persist through the winter months, giving way to an early spring market in 2025.”
Since June, there have been four consecutive interest rate cuts from the Bank of Canada, taking the key interest rate from 5 per cent to 3.75 per cent. Another rate cut is expected on Dec. 11.
The jump in sales hasn’t led to price increases yet due to the swell of inventory that built up over the last few months. But with a significant batch of supply unlikely to come before the spring, buyers re-entering the market in the new year will feel competition “heat up” and see “upward pressure on prices,” Zigelstein said.
Single-family homes will lead price gains as this segment of the market is chronically undersupplied — the majority of new builds are focused on high-density projects such as condos.
But the condo market, which has a glut of inventory, will struggle to find enough buyers next year, the report says.
“Toronto’s condo market is the softest it’s been in recent history, specifically in the downtown core. With interest rates expected to ease further, thousands of new units slated for completion next year, and new lending policies that will ease the burden of monthly carrying costs, this is a rare window of opportunity for first-time buyers,” said Zigelstein.
However, some first-time buyers who are ready to enter the market feel the condo units for sale are the wrong type of supply — the majority of the thousands of units on the market were built for investors to rent out, as smaller units generate better cash flow.
While larger condos have traditionally been a tough sell due to the price tag, first-time homebuyers want more spacious units or entry-level single-family homes.
However, as developers have pulled back in recent years due to costs leading to fewer project starts for new build condos, there will be a period of “ultra low” completions several years from now, creating a significant deficit of housing. That means investors will pile in when demand outpaces supply.
“The eventual return of real estate investors to this segment will result in increased competition down the road,” Zigelstein said.
