Condo prices in the Greater Toronto Area (GTA) are poised for another year of decline, according to a new report from TD Economics. The report, authored by economist Rishi Sondhi, forecasts that resale condo prices in the GTA will fall by an additional 10% in 2025, marking a continued correction from their peak in Q3 2023.
In total, condo prices could drop by 15% to 20% from their late-2023 highs before stabilizing, reflecting the impact of a weakening investor market, affordability constraints, and rising economic uncertainty.
GTA Condo Market Under Pressure
Sondhi notes that demand conditions have “weakened materially,” prompting TD to revise its outlook further into bearish territory. Sales activity is expected to remain near historic lows, as the GTA condo market adjusts to ongoing affordability issues and a changing economic landscape.
Despite the expected correction, prices would still sit 5-10% above pre-pandemic levels, highlighting how much values have climbed over the past several years.
Key Factors Driving the Decline
1. Slower Population Growth
After several years of rapid immigration growth, the federal government’s new restrictive immigration policy has taken effect, leading to reduced rental demand. As a result, average one-bedroom rents in the GTA dropped 5% year-over-year in Q4 2024, according to the report. With investor interest heavily tied to rental income performance, this drop in rental yields has significantly dampened investor enthusiasm.
2. Investor Activity Slowing
The report highlights that investors – once the backbone of the GTA condo market – are stepping back. The combination of elevated interest rates, high prices, and declining rental returns has made condo investments less appealing.
“It’s possible that the allure of achieving an acceptable ROI through rising condo prices has faded,” Sondhi writes, noting that affordability deterioration has been especially acute for investors over the past few years.
3. Economic Uncertainty
Broader macroeconomic trends are also weighing on buyer confidence. According to a recent Bank of Canada consumer survey cited in the report, 25% of Canadians said trade tensions made them less likely to make major purchases, compared to only 7% who said they were more inclined to spend.
At the same time, full-time employment declined in March, particularly in sectors sensitive to economic cycles. TD expects job losses to continue in the near term, with unemployment potentially rising to 7%.
4. Supply Still Relatively High
Although condo completions are projected to fall in 2025 – already down 17% in Q1 – the pipeline of existing developments remains substantial. As more units hit the market, listing pressure may continue to rise, as it did throughout 2024.
Will 2026 Be the Start of a Recovery?
TD Economics sees some signs of stabilization beginning in 2026, although the recovery is expected to be slow and measured. A key driver will be lower interest rates: TD forecasts that the Bank of Canada will cut its policy rate by 50 basis points this year, bringing it down to 2.25% and holding it there through 2026.
Lower rates could relieve some affordability pressure and bring more buyers back into the market. TD also expects pent-up demand, easing trade tensions, and improved macroeconomic stability to support gradual gains.
On the supply side, the slowdown in construction starts from late 2024 should result in fewer completions by 2026, helping to rebalance the condo market over time.
Federal Policy Could Help – Eventually
The newly elected federal government has proposed several housing-related initiatives aimed at boosting supply and affordability. Key promises include:
- Eliminating the GST for first-time homebuyers on purchases under $1 million
- Launching a national housing agency focused on new construction
- Cutting development charges by 50%, a potentially significant factor in high-cost markets like Toronto
However, TD notes that these policies will take time to impact the market. “The lags inherent in the homebuilding process suggest that the bulk of this impact on condo construction could happen after 2026,” Sondhi writes.
Outlook: A Challenging Year, Then a Slow Climb
The outlook for GTA condos in 2025 remains challenging. With prices expected to fall further, sales volume staying subdued, and investors stepping back, market momentum is likely to remain soft in the short term.
However, 2026 may offer a turning point if economic conditions improve and interest rates stabilize. While the rebound is expected to be modest, first-time homebuyers – rather than investors – could be the ones to drive the next cycle of growth.
References:
- TD Economics: GTA Housing Market Outlook, May 2025
- Bank of Canada: Canadian Survey of Consumer Expectations, Q1 2025
- Canada Mortgage and Housing Corporation (CMHC), 2025 Q1 Housing Completions
- Statistics Canada: Labour Force Survey, March 2025
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