Toronto home prices will be flat in 2025, predicts Re/Max, contrary to other predictions of a hot spring market

Toronto home prices are expected to remain flat in 2025 as the city deals with surplus inventory and reduced demand from first-time buyers and investors, a Re/Max forecast says, running contrary to other industry predictions that there will be a hot spring market. 
Re/Max Canada’s 2025 housing market outlook report predicts that Toronto prices will remain essentially flat, with an increase of just 0.1 per cent, and sales will jump by 12.5 per cent, largely due to move-up buyers (those looking to buy bigger homes) rather than first-time buyers, as the market remains unaffordable. It means the market will see an increase in activity, but the excess supply won’t be swallowed up by excessive demand. 
It contradicts Royal LePage’s forecast, which sees a booming Toronto market as interest rates fall, and immigration and relatively high incomes place upward pressure on sales and prices. 
But the first-time buyer cohort isn’t there to push the market forward, Re/Max says.
Typically, first-time buyers make up 30 to 40 per cent of buyers in Toronto, but now it’s sitting at 10 per cent and unlikely to change soon, said Cameron Forbes, Re/Max Realtron Realty broker.
“First-time homebuyers are the missing ingredient,” he said. “There’s affordability challenges of the down payment and mortgage costs, which need to be put through the stress test, which is sitting at around six per cent.” 
The minimum qualifying rate, or stress test, for uninsured mortgages is currently 5.25 per cent, or two percentage points higher than the actual mortgage rate being offered, whichever is higher. 
“People forget that they’re not qualifying at the four per cent fixed rate, it’s two percentage points above that,” Forbes said. “Unless they have a sizable gift from their parents, not many people can qualify for the mortgage.”
While the average selling price for all property types in the GTA has dropped by 15 per cent since the February 2022 peak, it’s still 38 per cent above 2019 levels.
Across Canada, many residents have a “positive” attitude about the real estate market in 2025, prompted by a series of interest rate cuts in the latter part of 2024, Re/Max says. 
The Bank of Canada has had four consecutive rate cuts since June, bringing the key interest rate from 5 per cent to 3.75 per cent — with another 0.25 or 0.5 percentage-point drop likely occurring in December. 
Re/Max Canada is expecting a more active market next year, with the national average residential price likely to increase by five per cent, and sales anticipated to rise in 33 out of 37 regions surveyed.
“While affordability challenges persist, the sequential interest rate cuts and changes to the mortgage stress test are a much-needed reprieve for those looking to get into the market,” Christopher Alexander, president of Re/Max Canada said in the report.
“The current environment is more encouraging than it has been in the past few years, especially for first-time homebuyers. However, a boost in sales, coupled with limited inventory, almost always leads to rising prices, which is the trend we’re expecting to see materialize in virtually all Canadian housing markets.”
However, Toronto will still be in recovery mode. 
Toronto’s market has remained sluggish over the last two years as prices increased just one per cent in the first half of 2023 compared to the first half of 2024, and sales decreased by 1.4 per cent over the same time period. 
Investors piled into the market during the pandemic peak in 2021 and 2022 as interest rates were at historical lows, but it’s unlikely that the key interest rate will hit 2 per cent, which is what the market would need to see to bring investors back in, Forbes said. 
“In the pandemic, investors were the predominant buyer, but now they’re not,” he said. “What we’ll see more of next year is people looking to upsize, who already have equity and aren’t as affected by higher interest rates.”