Prices have seen a big slump, but buyers don’t look set to return to the market in full force anytime soon
As Toronto’s condo market downturn stretches into 2026, prices are continuing to tumble – and recent weeks have even seen the return of condos priced below the $400,000 mark, a rare sight in one of Canada’s most expensive cities.
Across the city and its suburbs, average prices still sit well above that level, coming in at $604,759 in January despite a yearly drop of nearly 10%. But plummeting demand has seen steep discounts on smaller units, potentially opening an affordability window for buyers who were previously frozen out.
Rates.ca mortgage and real estate expert Victor Tran (pictured top) sees some buyers jumping off the sidelines as a result of that drop, but he doesn’t expect a wider market bounce-back even after the pendulum swung firmly back in buyers’ favour.
That’s because plenty of the same factors that previously kept buyers out of the market are still at play despite lower prices. “Affordability is an issue, even at a lower purchase price and today’s rates hovering around 4%,” Tran told Canadian Mortgage Professional.
“There are all these other fixed expenses tied to housing that are bound to go up: taxes, condo fees, insurance, utilities. Once we add all of those things together, even if the purchase price is a little bit less now, it’s still really challenging for a lot of people.”
Price declines expected to continue
Continuing uncertainty over the economic outlook isn’t helping either, with the ongoing tariff war keeping a lid on purchase activity and leaving many buyers reluctant to commit to taking on debt.
The simple fact that prices in the condo market have been on a months-long slide is also convincing would-be buyers to hold off on a purchase for now, according to Tran.
Swelling inventory and lack of demand mean there’s no end in sight to the market’s deep freeze, and the year ahead is expected to see prices fall even further.
“Why purchase now knowing that you can potentially get it for cheaper a month later or two months later?” Tran pointed out. “There’s still going to be some buyers out there that will see the opportunity. They won’t mind if the values dip by a little bit by the time they take possession of the unit as long as they hold onto it for the long term.
“But I think more and more people are seeing now that you can’t just buy it and expect to make money off it in the next five years. It’s a long-term hold, maybe 10-plus years.”
Tiny units not seeing many takers in Toronto
The glut of so-called “dog-crate” condos that have flooded the market in Toronto over the past decade has also raised questions over whether those units will find buyers, with their typical purchasers – real estate investors – abandoning the sector in droves.
A surge in immigration and international student demand helped turn sub-500-square-foot condos into a hot commodity for investors who could pay down the mortgage with rental income and sell the property, often for a tidy profit, down the line.
But while demand for those properties has evaporated, Tran said plenty of the condos hitting the market priced under $400,000 are of a better standard, particularly those in older buildings.
“You can get a one-bedroom, 500-square-foot condo with a parking spot for the high three [hundreds] right now, and the quality is decent,” he said.
“It’s not like some of the newer condo layouts where you can barely fit a dining table and couch into the main area. So it really depends on the building and the area.”
The outlook for those tinier units remains bleak: rents have been on a steady descent, immigration numbers are down and few buyers view them as a purchase that makes sense even at big discounts.
“With a lot of the newer buildings, the way they created the floor plan is awful,” Tran said. “It’s just not functional at all.”
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