With school out and the sun shining, summer is typically a hot season for the Toronto real estate market. But with economic uncertainty brought on by geopolitical conflicts, few buyers are in the mood to make the largest purchase most Canadians will make in their lifetimes.
According to the Toronto Regional Real Estate Board (TRREB), sales were down 13.3% year over year in May, and the average selling price fell 4%, annually, to $1,120,879. While an improvement over the 23.3%, 23.1%, and 27.4% annual drop in sales recorded in April, March, and February, respectively, May's numbers continue to reflect the ongoing market shyness brought on by tariff-related economic uncertainty.
Buyer Psyches Remain Cautious
“Structurally, there is nothing that should be holding the post-pandemic recovery back," CEO of Royal LePage Phil Soper tells STOREYS. "Yes, we're dealing with potential economic damage caused by the new American administration, but the actual impact has been very muted.”
Soper points out that though the unemployment rate has ticked up, it hasn't increased as much as some expected, the default rate on mortgages remains one of the lowest in the world, and incomes are still rising at a faster clip than they were pre-pandemic.
Phil Soper, CEO of Royal LePage Canada
“What this means is housing affordability is improving. So structurally, we're in great shape," says Soper. "The challenge, of course, is that this is more than a financial or a structural decision. It's also an emotional one, and, emotionally, people are feeling the stress of flip-flopping American trade messaging.”
Summer Market Outlook
While buyer psyches remain cautious, markets are beginning to see signs of life. Sales ticked up on a monthly basis for the second month in a row in May, and the average selling price inched up as well, signalling a potential shifting of tides in the coming months.
Soper shares that unreleased June data is showing "strong" sales numbers, reflecting a delayed spring market. "It's a small data point — four weeks in a year — but it appears we're experiencing a late spring market, not a crazy spring market, but certainly bucking typical seasonal trends.”
Things may heat up this summer, but looking ahead, Tim Syrianos, Broker of Record at RE/MAX Ultimate Realty Inc. in Toronto, is forecasting that a proper rebound will likely occur later on in the year.
"I believe that as we head towards the back-end of 2025, we will start to see improved sentiment, because we are seeing a lot of people who are inquiring, and they're wondering about their window of opportunity," Syrianos tells STOREYS. "You know, maybe [their window] is only six months to a year and not two or three years, and they want to get ahead of it."
On the price front, Syrianos says he doesn't foresee "a plunge in values," as most sellers have weathered market fluctuations and don't feel the need to drop their price dramatically to get their home sold. But general price softness is expected this summer.
Soper shares that Royal LePage will be slightly lowering their Toronto price forecast for the third quarter, largely due to the struggling condo market. "We expected a lift in the condo sector in the second quarter. That didn't happen," Soper says. "[...] I'm thinking we'll see soft prices in the second and third quarter, and price appreciation in September through December, but nothing crazy.”
Between A Balanced And Buyers' Market
In May, active listings in Toronto hit around 31,000 — levels not seen since 2002. So for those that are in the financial and emotional headspace to buy, a wealth of options and a decent amount of negotiating power await as listings reach historic levels this summer.
Because listings are so plentiful, Syrianos says many buyers have taken on what he calls a deal-or-no-purchase mindset. "We are between a balanced and buyers' market in many segments of the marketplace because of the volume of listings," he says. "So the buyers are saying, 'listen, either I get an opportunity and I get myself a good deal, or I'll keep on holding.'"
Tim Syrianos, Broker of Record at RE/MAX Ultimate Realty Inc.
Royal LePages' Soper also points out that the majority of Toronto homes are selling for slightly less than their asking price as buyers utilize their market leverage to negotiate sellers down. According to the latest Market Pulse report from Toronto real estate agency Wahi, 87% of Toronto neighbourhoods are in underbidding territory as of May.
Of course, how much sellers are able to negotiate prices down will depend on product type and neighbourhood. "The Devil's in the details," says Soper. "You see more flexibility in the condo and semi-detached townhouse market than you do in the fully-detached market."
Geographically, buyers might have a harder time securing deals in desirable suburban Toronto neighbourhoods like Etobicoke, East York, Leaside, Riverdale, North Toronto, and High Park. "Not all of the GTA is performing poorly. There are Toronto proper neighbourhoods that have traditionally been in high demand that maintain high demand," says Syrianos. "And you are seeing, in some cases, multiple offers. [...] They're not performing the same way that they did in past markets, but you're still seeing interest in those really good neighbourhoods."
Saved By The Interest Rate Cut?
So far, Bank of Canada rate cuts haven't made much competition for Trump's erratic trade policy when it comes to spurring housing market activity. But prior to Trump's election, it did seem as though lower rates were taking hold and emboldening some Toronto buyers to hop off the sidelines.
Before Trump, Royal LePage had predicted three 25-bps cuts by the end of the year. Now they expect one 25 bps cut on July 30 and another quarter-point cut later in the year. Soper attributes the reduced forecast to potentially inflationary forces brewing both at home and abroad, including the possibility of the war in the Middle East driving up oil prices, Trump’s inflationary ‘Big Beautiful Bill,’ and rising youth unemployment in Canada.
As the July 30 interest rate announcement approaches, many buyers and those in the real estate industry are hopeful for a 25 bps cut to give the housing market a mid-summer kick. "Do I believe that the rate cut in July would be a valuable one? I do," says Syrianos.
