Toronto’s real estate market current state of affairs amid trade tensions
Real Estate Market has long been a cornerstone of Canada’s economy, but in 2025, it’s navigating turbulent waters. The looming threat of U.S. tariffs and escalating trade tensions are casting a shadow over the Greater Toronto Area (GTA), influencing buyer behavior, construction costs, and market confidence. While the market remains resilient, these global economic pressures are creating challenges—and opportunities—for buyers, sellers, and developers. Let’s explore how trade tensions are impacting Toronto’s housing landscape and what it means for you.
A Buyer’s Market Amid Economic Uncertainty
The GTA real estate market is currently in a buyer’s market, with record-high inventory and softening prices providing opportunities for those ready to act. In June 2025, active listings reached 31,603, a 34% increase from the previous year and the highest in over 30 years, according to the Toronto Regional Real Estate Board (TRREB). The average home price dropped 5.2% year-over-year to $1,101,691, and the benchmark price fell to a four-year low of $995,100. This shift has been partly fueled by trade uncertainties, particularly U.S. tariffs on Canadian goods, which are causing buyers to adopt a cautious “wait-and-see” approach.
U.S. President Donald Trump’s proposed 25% tariffs on Canadian exports, including steel and aluminum, have heightened economic concerns. As reported by RBC Economics, these tariffs have “shaken” Toronto’s market, leading to a plunge in transactions to a new cycle low. Buyers are hesitant, worried about job security and economic stability, as TRREB’s Chief Information Officer Jason Mercer notes: “Buyers need to feel their employment situation is solid before committing to long-term mortgage payments.” This caution has resulted in a 23% year-over-year sales drop in March 2025, with only 5,011 homes sold.
However, this slowdown is a silver lining for buyers. The surge in listings—up 81% for houses and 59% for condos in 2025—means more choices and negotiating power. For those with stable finances, now is a prime time to secure a home at a lower price, especially in the condo market, where active listings hit a record 8,659 units.
Rising Construction Costs and Developer Challenges
Trade tensions are also driving up construction costs, impacting new home development. The U.S. and Canada are each other’s top trading partners for homebuilding materials, and tariffs on Canadian steel, aluminum, and lumber are increasing expenses for developers. According to Global News, these tariffs could make homeownership even less attainable by raising construction and renovation costs. This is particularly problematic in Toronto, where only 35,000 new homes are built annually against a population growth of over 125,000, exacerbating the housing supply crisis.
Developers are feeling the pinch, with new condo sales plummeting 89% below the 10-year average in June 2025. Many projects are failing to meet the 75% pre-sale thresholds required for bank approval, leading to cancellations and a halt in new construction. A stalled condo market and fewer new homes entering the pipeline, which could tighten supply in the long term.
Investor Hesitation and Market Dynamics
The uncertainty surrounding U.S. tariffs is also impacting investor confidence. Toronto’s condo market, heavily reliant on investors (who account for 70% of pre-construction sales), is seeing a significant pullback. Domestic and foreign investors are either selling at a loss or exiting the market, potentially tightening rental supply if properties are sold off or converted. The federal ban on foreign ownership, extended to 2027, further limits capital inflow, though some suggest lifting it early to stimulate the condo market.
Despite these challenges, there’s optimism for strategic investors. The commercial real estate sector, particularly industrial properties, is showing resilience, with $1.3 billion in transactions in Q1 2025, up 26% year-over-year. Investors seeking long-term growth may find opportunities in undervalued assets, especially as lower interest rates (now at 2.75% after seven Bank of Canada cuts) provide some relief.
What’s Next for Toronto Real Estate Market?
The trajectory of Toronto’s real estate market hinges on how trade tensions evolve. A resolution to U.S.-Canada trade disputes could restore buyer confidence and boost sales, as TRREB suggests a stable trade agreement would alleviate economic pressure. Conversely, prolonged tariffs could deepen the slowdown, potentially leading to a recession and further dampening demand. Government policies, like the proposed GST waiver on new homes up to $1.3 million, aim to stimulate the market, but critics argue these measures may primarily benefit investors rather than first-time buyers.
For now, the market remains fragile but not on the verge of collapse. As realtor Tom Storey notes, “While prices have softened, the long-term outlook for Toronto real estate remains positive.” Buyers who act strategically can capitalize on current conditions, while sellers may need to adjust expectations and price competitively to attract cautious buyers.
Navigating the Market in 2025
If you’re considering buying in Toronto, now is a time to leverage the abundance of inventory and softer prices. Work with a trusted real estate professional to identify properties with strong long-term value, particularly in high-demand areas. Sellers should focus on realistic pricing and staging to stand out in a competitive market. For investors, exploring commercial or undervalued residential properties could yield returns as the market stabilizes.
