Plenty are holding off on a purchase in the expectation that the housing market correction isn’t done yet
After years of rapid price acceleration and furious bidding wars in Canada’s hottest housing markets, hopeful first-time homebuyers likely saw cause for optimism at last when purchasing activity finally cooled – and prices began to slide.
But while markets including Toronto and Vancouver have fallen into a deep freeze over the past two years, few mortgage brokers are reporting a flood of new buyers stepping off the sidelines as prices continue to fall.
That’s partly because affordability is still stretched for plenty of buyers, while others appear to be holding fire as they wait to see whether prices will plummet further still in 2026.
In Toronto, where prices are well below their 2022 peak, broker Paul Meredith (pictured top) of PMT Mortgage Corp. told Canadian Mortgage Professional many buyers were likely intent on buying eventually – just not yet.
He pointed to a Royal LePage survey from September showing that about 82% of prospective first-time buyers hope to move in the next 12 to 24 months.
But for buyers in a position to purchase now, waiting for a further cooldown might not be the best course of action, according to Meredith. “The question is: why wait?” he said. “With GTA [Greater Toronto Area] prices down roughly 20% from the peak, mortgage rates having dropped roughly 2%, and a healthy surplus of inventory, all signs point to an ideal entry point.
“If the survey data holds true, we’re looking at a surge of activity beginning in late 2026 through 2027 that could trigger another real estate boom.”
In September, Royal Bank of Canada (RBC) highlighted a huge drop in average home prices in Toronto since the beginning of 2022. The MLS Home Price Index, it said, slipped by 25% in that period, and by 5.5% in the prior 12 months alone.
That brought average prices more than $320,000 lower than their peak, the bank said, although assistant chief economist Robert Hogue underlined “a long way to go” until activity rebounded.
Meredith sees a swing back toward a seller’s market “once it becomes obvious to everyone that the market has bottomed out,” a point that’s currently difficult to predict.
Buying a home still isn’t getting much easier
The affordability hurdle remains a big one in Toronto, one of North America’s priciest housing markets. The monthly mortgage payment required for the average home dipped by just $41 between October and November, according to Ratehub.ca, with the average income to afford that home sitting at a staggering $195,890.
It’s no surprise that first-time buyers are still having to turn to support from parents and other family members to stump up the downpayment for a home even despite declining prices over the past two years.
“We see a large number of our first-time homebuyers with gifted downpayments,” Meredith said. “In some cases, the gifts can be in the range of several hundred thousand dollars. They’re almost a necessity for homeownership to become a reality for many of our clients buying their first home.
“We haven’t seen an influx of co-signers, as we find many prefer to work their way up to qualify for the purchase on their own.”
Have government efforts moved the needle on affordability?
Last year, comments by federal housing minister Gregor Robertson suggesting property values don’t need to fall sparked a heated debate on how younger Canadians can hope to enter the housing market without help.
Initiatives introduced by the federal government in recent years include the First Home Savings Account, a tax-free-in, tax-free-out account allowing first-time buyers to put money towards a purchase, as well as a hike in the mortgage insurability cap to $1.5 million and extended mortgage amortizations of 30 years.
Those moves, Meredith said, signal a “genuine commitment” by authorities to supporting first-time homebuyers – but he still says further tweaks could be needed.
“For now, I think the government needs to assess the effectiveness of these programs before making any other changes,” he said. “I think eventually we’ll see the maximum amortization expanded beyond 30 years, but I don’t think we’ll see this anytime soon.”
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