Toronto Housing Market Poised for Comeback

Sales activity began to flourish again in the final months of 2024, following sluggish demand over summer. This trend should continue well into 2025, according to a new report by Royal LePage.

Several converging factors are revitalizing the real estate market and making home ownership more attainable. Interest rates have fallen sharply, with further reductions expected this year. Many economists believe the Bank of Canada could lower rates by another 100 basis points by the end of 2025, steadily improving affordability. At the same time, new mortgage rules are already helping younger people by increasing borrowing power and reducing monthly carrying costs.

Despite improvements in market conditions, there are many factors at play that could impact consumer confidence and, in turn, activity. They include political instability in Ottawa — an early federal election is anticipated for mid-spring — friction with the new U.S. administration over its aggressive stance on trade and a weakening Canadian dollar.

That said, Canada’s housing market is fundamentally driven by domestic factors. With strong full-time job growth, improving housing supply in key markets and more accessible financing, healthy activity levels are predicted to persist. But a sudden wave of demand or a huge burst of sales is not foreseen. Rather, a gradual increase in market activity will unfold, setting the stage for an early and active spring market.

Right now, there’s enough inventory so home prices are likely to trend only modestly upward. Royal LePage is forecasting that the aggregate price of a home in the Greater Toronto Area will increase 5% in the fourth quarter of 2025, compared to the same quarter last year.