Seeing the future in real estate is difficult. And 2025 is already shaping up to be another challenging year for making Toronto Real Estate predictions.
In 2024, Toronto real estate experts predicted strong spring and fall markets, but the results were flat. Even multiple sharp interest rate cuts did not produce the anticipated market bump.
2025 GTA Market Expectations
Experts still think that, due to interest rate cuts, more buyers will re-enter the real estate market in the spring, attracting more sellers.
Sellers of single-family homes are likely to receive the most offers and see their prices increase, while sellers of condos will have difficulty attracting buyers. Some experts believe that the cost of single-family homes will rise by seven percent and that overall, prices will increase from $1.16M to $1.22M by the start of the fourth quarter of 2025.
GTA Condo Outlook
Condo prices, meanwhile, are forecast to fall by one percent because of excess inventory. The reasons why there are so many condos are twofold:
- First-time homebuyers aren’t interested in most condos, which are smaller in size; even larger condos aren’t big enough for these buyers, who want more space for their money.
- Rents are decreasing, so fewer investors are buying condos because rents won’t cover mortgage costs.
First-time homebuyers, who have additional flexibility due to recent federal mortgage changes, could be the key to a bounce-back market. This flexibility might spark competition for entry-level homes and stoke the market overall.
Interest Rates
Over the next six months, the Bank of Canada is expected to lower its key interest rate anywhere from 75 to 50 basis points. This move would put the overnight lending rate at 2.5 to 2.75%. Variable rates would then follow suit and fall to 3.5 to 3.75%.
With a looming Canada-USA trade war and the uncertainty that comes with it, those renewing or opening fixed-rate mortgages are looking at two- to- three-year instead of five-year rates. The shorter terms protect buyers from variable rate risks while allowing them to switch to potentially lower rates when their term is up in a few years instead of five.
Summary
While the details of the trade war remain to be determined and the aftereffects are unknown, we’re in for another unpredictable year.
However, other factors, like mortgage changes and further interest rate reductions, could prompt more buyers to enter the market and spur the hot conditions that have been anticipated since early 2024.
Are you ready to move to the next stage? Let’s chat. Send me an email (hillary@hillarylane.ca) or text/phone (416-882-4707).
Photo by roam in color on Unsplash
