Why Are Prices Still Falling in Toronto’s Real Estate Market?

September 2025

Toronto real estate has been under pressure throughout 2025, and the question many clients, buyers, and sellers are asking is simple: why haven’t prices stabilised yet?

Despite years of rapid growth, today’s market looks very different. Listings are climbing, sales are lagging, and the psychology of both buyers and sellers has shifted dramatically. Below are six key reasons prices continue to soften — and what they mean for the months ahead.

1. Excess Supply vs. Demand

Inventory is climbing faster than sales. In July 2025, listings surged 26.5% year-over-year, while sales rose only 13.2%. That imbalance is creating significant downward pressure on prices.

Homes are sitting longer — averaging 20–30 days on the market — and many are selling below asking. Simply put: there are more homes available than there are qualified buyers ready to act.

2. High Interest Rates

Borrowing costs remain elevated compared to the ultra-low mortgage rates buyers enjoyed before 2022. Even with signs of stabilisation, the federal stress test means many households can’t qualify for large enough mortgages.

This reduced buyer pool hits hardest among first-time buyers, forcing sellers to lower asking prices in order to attract offers.

3. The Affordability Crisis

Toronto housing remains deeply unaffordable relative to incomes. For many households, ownership still feels out of reach. Potential buyers are choosing to wait for deeper price corrections rather than stretch their finances today.

Meanwhile, many renters are renewing leases instead of purchasing, which further slows demand.

4. Shift in Buyer Psychology

In 2020–2021, the market was driven by FOMO — buyers rushed in, competing with multiple offers.

Now the dynamic has flipped. Buyers know they hold the leverage. They negotiate harder, make fewer bids, and expect discounts. Sellers who price too high quickly discover they must reduce their expectations.

5. Economic & Policy Uncertainty

Uncertainty is another drag on the market.

• Immigration and student visa caps — including the 90,000 fewer international students admitted to Canada this year — are dampening rental demand and reducing investor activity.

• A broader economic slowdown and job insecurity are making families cautious.

• Investors are exiting as mortgage carrying costs now exceed rental income, especially in the condo segment.

6. Condo vs. House Divergence

Not all property types are affected equally.

• Condos: The resale condo market is oversupplied, with investors selling off units. Prices remain under pressure, though some pre-construction projects are still drawing buyers.

• Detached Homes: Down roughly 10% year-over-year, detached homes are especially hard-hit because high interest rates magnify affordability issues at higher price points.

In Short

Toronto real estate prices are still falling because:

• Supply is flooding the market.

• High interest rates and stress tests limit borrowing power.

• Housing remains unaffordable compared to incomes.

• Buyers have shifted from FOMO to caution.

• Economic and policy uncertainty clouds the outlook.

For now, the market belongs to the buyer, and patience, strategy, and realistic pricing are the key drivers of success.

August 2025 Market Overview (GTA)

• Home Price Index: Down 0.1% month-over-month to C$978,100; 5.2% lower year-over-year.  FinimizeReuters

• Sales: Down 1.8% from July to 5,633 units—first month-over-month dip in five months.  Reuters

• Listings: Up 9.4% year-over-year.  Reuters

Final Thoughts: A Window of Opportunity

For buyers — especially higher-net-worth investors — today’s market conditions represent a rare window of opportunity. Prices are soft, inventory is high, and negotiating power is firmly on the buyer’s side. Strategic investors know that downturns often plant the seeds for tomorrow’s profits.

But this kind of market won’t last forever. Real estate cycles are constantly shifting, and the signs of a rebound can emerge quickly. Key indicators that the market may be turning back toward sellers include:

• Falling inventory levels: fewer new listings and more homes selling faster.

• Shorter days on market: properties start moving within one to two weeks instead of a month.

• Multiple offers returning: more competition signals renewed buyer urgency.

• Price stabilization: fewer price cuts and consistent sale prices closer to list.

For now, buyers hold the advantage — but those waiting too long could miss the moment. Acting during periods of uncertainty has historically rewarded investors who think long-term.

Please contact Broker Donna Bulika for advice on selling or buying real estate in Toronto and to book your private consultation by filling out the form below or calling/texting at 416-797-6226, or emailing sold@donnabulika.com