Toronto | October 6, 2025, 10:00 IST — Filed via Reuters housing market data

The Greater Toronto Area (GTA) housing market showed renewed momentum in September 2025, with sales climbing to their strongest level since January. Yet, despite the rise in transactions, average home prices continued to edge lower, highlighting the ongoing affordability challenge for buyers and pressure on households managing higher mortgage payments.

Sales Volume Rebounds

Toronto recorded 5,765 home sales in September (seasonally adjusted), a roughly 2% increase from August. This marked the highest monthly tally in eight months, signaling that buyers are gradually returning to the market after a sluggish summer.

Realtors point to pent-up demand as some households delayed purchases earlier this year, waiting for better borrowing conditions.
The Bank of Canada’s September rate cut — which lowered the overnight rate to 2.50% — has also boosted buyer sentiment by trimming costs on variable-rate mortgages.
Fall is traditionally a stronger season for home buying, and September’s activity reflects this seasonal pickup.

Prices Edge Lower

While sales volumes improved, prices showed no signs of recovery:

The Home Price Index fell 0.5% month-over-month, taking the average GTA home price down to approximately C$971,500.
On a year-over-year basis, prices remain lower by about 5.5%, reflecting the cumulative impact of higher borrowing costs over the past two years.
Detached suburban homes saw the sharpest price corrections, while urban condos fared relatively better with more stable valuations.

This divergence reflects buyer preferences: many entry-level and downsizing buyers are turning to smaller units, while larger properties remain pressured by affordability.

Why Activity Is Rising Despite Price Weakness

Several key drivers explain why buyers are returning even as values dip:

Cheaper borrowing costs
The Bank of Canada’s September move immediately flowed through to lender prime rates. Borrowers with variable mortgages saw modest payment relief, while prospective buyers gained slightly improved qualification odds.
Seasonal demand boost
The fall season typically attracts more buyers after the quieter summer months. September often sees a rebound in transactions.
Investor re-entry
Some investors view current price softness as an opportunity to secure properties, betting that prices may bottom in the coming months if rates fall further.

What This Means for Borrowers

First-time buyers: Lower average prices provide a small affordability cushion, but mortgage stress-test rules still limit how much they can borrow. Buyers must prove they can afford payments at 2% above the contract rate, keeping qualification standards tough.
Renewing households: Many homeowners with 5-year fixed mortgages signed in 2020–21 at ultra-low rates (1.5–2.0%). As renewals hit in 2025, they face payment jumps of 15–20%, even if switching into variable products.
Investors and landlords: Rental demand across Toronto remains robust. Softening purchase prices combined with strong rental yields are drawing some investors back, though higher financing costs still squeeze cash flows.

Wider Market Context

Nationally: Similar conditions are visible in Vancouver, Calgary, and Ottawa, where sales activity is stable or improving slightly, but prices are still under pressure.
Economic backdrop: Canada’s manufacturing PMI fell to 47.7 in September, while the services PMI slipped to 46.3 — both signaling contraction. This weakness is fueling expectations of more Bank of Canada cuts later in 2025.
Forecasts: Analysts from major banks expect the BoC’s overnight rate could fall to 2.25% by year-end, which would further ease mortgage payments for variable-rate borrowers.

What to Watch

Bank of Canada’s October 29 meeting — markets are pricing in a 50–55% chance of another 25 bps cut.
Mortgage renewals — as thousands of fixed mortgages reset at higher rates, household finances will be tested.
Affordability vs confidence — buyers may take advantage of lower prices, but weak wage growth and job softness could keep recovery muted.

Outlook

September’s Toronto housing data shows a market in transition. Sales are climbing as borrowing costs ease, but affordability constraints continue to weigh on prices. For buyers, this creates a mixed picture: more choice and softer valuations, but ongoing challenges in qualifying for a mortgage and managing higher carrying costs.

If the Bank of Canada delivers further cuts this year, the balance could tilt in favor of more robust demand heading into 2026. Until then, the GTA market looks set to remain active but cautious.