After nearly two years of slowdown, Canada’s housing market appears to be regaining momentum — and Toronto is leading the charge. According to fresh data released this week, national home sales rose for the fourth straight month in July 2025, signaling a broader recovery that could reshape affordability debates and mortgage demand heading into the fall.

Toronto at the Forefront

Toronto accounted for more than 40% of the increase in national housing sales, making it the single largest driver of Canada’s housing rebound. Realtors point to a mix of renewed buyer confidence, stable interest rate expectations, and strong immigration-driven demand fueling the recovery.

Average home prices in the Greater Toronto Area (GTA) have ticked upward, reversing months of decline. Detached homes in core neighborhoods remain competitive, while condos and townhouses have seen particularly strong activity among first-time buyers and investors.

“Toronto is proving remarkably resilient,” said a market analyst from RBC. “Buyers who were waiting on the sidelines are now returning, convinced that interest rates may finally ease in the coming quarters.”

A Broader National Trend

While Toronto leads, other major Canadian cities are also showing signs of revival. Vancouver’s luxury market saw renewed activity, Calgary continues to attract interprovincial migrants seeking affordability, and Montreal reported its strongest July sales in five years.

According to the Canadian Real Estate Association (CREA), overall sales volumes are still below the 2021 pandemic highs but are trending steadily upward. July’s transactions were 15% higher year-over-year — a sharp contrast to last year’s slump when buyers were sidelined by rising mortgage rates.

Mortgage Market Impact

The recovery in housing sales has a direct bearing on the mortgage market. Lenders report growing demand for both purchase and refinance applications, with borrowers exploring fixed and variable rate options amid shifting expectations for Bank of Canada policy.

Although average five-year fixed mortgage rates remain elevated at around 5.7%, the recent stabilization of bond yields and hints of a future rate cut have brought cautious optimism. Some lenders have already trimmed their advertised rates by 10–15 basis points in anticipation of easing inflation.

For homebuyers, the challenge remains affordability. With the average Toronto home price once again edging above $1 million, buyers are leaning heavily on longer amortization periods and co-borrowing strategies to qualify for loans.

Investor & Policy Considerations

Real estate investors, who had stepped back during the peak rate cycle, are slowly re-entering the market, particularly in multi-family and rental-friendly segments. Experts suggest that this renewed activity could further tighten rental supply in Toronto, where vacancy rates remain under 2%.

On the policy side, housing advocates argue that recovery in sales must be balanced with affordability measures. Rising home prices risk sidelining first-time buyers again, unless federal and provincial governments accelerate supply-side reforms.

Ottawa has hinted at new CMHC-backed initiatives to boost affordable housing construction, while Ontario has pledged zoning reforms to expand medium-density housing across the GTA.

Why This Recovery Matters

For the broader economy, housing remains one of Canada’s most significant growth drivers. A revival in real estate not only boosts mortgage lending but also spurs activity in construction, renovation, and retail.

Yet economists caution against over-optimism. “We’re in the early stages of recovery,” said an economist at BMO. “Much depends on the Bank of Canada’s next move. If rates remain high into 2026, the recovery could stall. But if easing begins later this year, sales and prices could accelerate sharply.”

The Bottom Line

Canada’s housing recovery is gaining real momentum, and Toronto is leading the way. While rising sales volumes are a positive sign, affordability challenges remain front and center. For buyers and mortgage borrowers, the coming months will be critical in determining whether this recovery becomes sustainable or sparks another affordability crunch.

Homebuyers: Expect more competition in Toronto and other major cities; locking in mortgage pre-approvals early will be key.
Investors: Multi-family and rental segments could see accelerated demand.
Policy Watchers: Look for CMHC and provincial housing reforms that could shape affordability.

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