What’s Happening

A few big mechanics are colliding at the same time:

• Prices are roughly $130k off the early-2022 peak, and mortgage rates are down about 2% from the 2023 highs. That changes the income math materially. The “required income” to buy the average GTA home fell from just over $200k to roughly $150k.
• But activity hasn’t followed. TRREB’s work comparing employment levels to the historical link between jobs and home purchases implies we should be closer to ~115k sales. Instead, we’re around 62k, roughly 50k missing transactions.
• The missing ingredient is economic confidence. IPSOS survey data points to cost-of-living pressure, economic uncertainty, and job anxiety as the real brakes. Even when housing prices come down, people don’t transact if they don’t feel stable.
• The rental market stopped pushing people into ownership. Vacancy rates have risen (roughly doubling from the ~1.5% era to around ~3%), and rent growth has reversed.
• Meanwhile, the demand pipeline is growing. Immigrants typically rent for 5-7 years before buying. The big cohort that arrived in 2022-2023 is likely to be in the market to buy around 2028-2030.
• The supply pipeline is weak. With pre-construction activity near standstill, we risk under-building for the late-2020s, which is how you end up with a supply crunch after a slow market.

Why it Matters

This matters because Toronto’s housing market isn’t just about prices and sales. It’s tied to the city’s economic and social stability.

• For households: A market that looks more affordable on paper is only helpful if people feel secure enough to act. If confidence stays low, transactions stay low, and mobility freezes. That has real downstream effects: people can’t move for jobs, families can’t size up, and older owners can’t downsize because there’s nothing that feels like a good trade.
• For sellers: The buyer pool is skewing heavily toward first-time buyers, which means price sensitivity is the norm. You are not selling into the 2021 frenzy. You are selling to buyers who have lots of options and are comparing near-identical listings.
• For investors and the rental ecosystem: If condo investors retreat and purpose-built rental only works with CMHC-style financing, the “who builds housing” question gets narrower and riskier.
• For the city’s growth model: Toronto’s infrastructure funding has leaned hard on development charges. When construction slows, the city’s revenue shrinks. That pressure is exactly when you see policy change, sometimes good (structural fixes), sometimes messy (short-term patches).
• For the next decade: A slow 2026 doesn’t automatically mean prices keep sliding. Slow years tend to shut down the future supply pipeline **because pre-con sales dry up, developers pause projects, and lenders get more cautious. That means fewer completions show up years later. If the 2022–2023 immigration cohort hits typical first-time-buyer timing in 2028–2030 while we have reduced supply, you can get a fast swing from “too much choice” to “not enough listings.”

My Take

On paper, the market looks like it’s giving buyers what they asked for: lower prices and lower rates.

Affordability improved. But people aren’t robots who buy the moment a spreadsheet looks better. They buy when they feel safe: stable job, predictable expenses, and a sense that the future isn’t about to get worse. Right now, the cost of living is still punching people in the face, and economic confidence is sitting at pandemic-level lows. So even with lower rates and lower prices, people are choosing to wait.

Waiting is completely reasonable. Just be clear on the trade-offs you’re choosing.

• If you’re a first-time buyer with stable income and you’re planning to stay in Toronto for five-plus years, this is one of the better windows we’ve seen in a while. Inventory is up in key segments (especially condos), you can negotiate, and you can walk away.
• If you’re selling, don’t price like it’s 2021 and hope the market “comes back.” It won’t, not on your timeline. The market is telling you what it’s worth, and buyers have choices. Price it right, show it well, and treat marketing as a necessity, not a nice-to-have.
• If you’re an investor, I’d be selective and realistic. There are opportunities in multiplex / missing-middle projects because policy has finally unlocked some of that land and DC exemptions change the math, but only if you actually understand approvals and construction risk. Purpose-built rental can work, but in a lot of cases the numbers don’t pencil without CMHC-backed financing.

My biggest worry is as we enter the new decade. If Toronto under-builds for years while the delayed demand stacks up, we’re basically manufacturing the next supply crunch. The city and province need to stop treating housing like a cycle to ride out and start treating it like an essential system: boring, funded, and built consistently, even when the headlines are negative.

And here’s the part that drives me crazy: every level of government has benefited from a decade of hot real estate, whether it’s land transfer taxes, HST, income taxes tied to construction and sales, or cities leaning on development charges to balance budgets. They spent years talking like affordability was the priority while the machine kept running. Now that the market is finally cooling, the tone is “problem solved” and policy attention drifts, even though affordability is still broken for the people who actually live and work here.

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