Ah, 2025… Let’s start with some good news. The obsession with interest rates that dominated the past two years seems to have eased. We even saw a quarter-point rate cut in March. That means anyone with a variable-rate mortgage or those starting a new mortgage will enjoy lower payments than they have in the past two years. While rates aren’t at their lowest in the past five years, they’re low enough to shift the mood from deep concern over inflation and rising rates to a more comfortable stability.

But as one uncertainty fades, another one takes its place—the on-again, off-again (and who-knows-again) trade war with the U.S. This time, the path forward is murkier. Unlike with interest rates, where we knew cuts would come as inflation dropped, it’s unclear what’s ahead. Will we see a swift resolution and a return to normalcy? Or a prolonged trade war that leads to a recession—and possibly a much-needed realignment of the Canadian economy?

For now, I’ll leave that question unanswered. No one knows exactly how this will play out, but what we do know is that the uncertainty has been looming since January—and it’s reflected in Toronto’s real estate market so far this year. Sales are down, and inventory is building, particularly in the condo sector. That said, there are still buyers. Every market attracts and repels different types of buyers. So, let’s take a look at who’s buying and who’s holding back in the current Toronto real estate market.

Who’s Pulling Back from Buying in Toronto Real Estate?

Investors

For foreign investors, there’s still a federal ban on purchasing property in place until January 1, 2027. This was introduced to curb price increases—and it worked. Foreign buyers are sitting on the sidelines. Local investors, too, are hesitant. Rents are slowly declining, and the Tenant/Landlord Tribunal remains significantly backlogged, meaning a bad tenant could mean months of unpaid rent. With rental income slightly down and bureaucratic delays in place, many investors are frustrated. The numbers just don’t add up right now.

Pre-Construction Buyers

This isn’t a new trend. Pre-construction buyers started pulling back significantly last year for obvious reasons—prices are simply too high. Few investors are willing to pay what developers believe their units will be worth upon completion. Because of this, sales of pre-construction units are way down, and as a result, fewer projects are launching. In Ontario, at least 70% of pre-construction units must be sold before building can even begin. With fewer projects reaching that threshold, future condo supply will be significantly lower. By 2028 and 2029, we may see a condo shortage because of today’s slowdown.

FOMO Buyers

In a hot market, FOMO (fear of missing out) buyers rush to purchase before prices rise further. But right now? Prices are stable. They’re neither crashing nor skyrocketing. Without the urgency, buyers are taking their time, waiting for the right property rather than feeling pressured to buy immediately.

Who Is Buying in Toronto Real Estate?

Renters Turned Buyers

Good news for renters: it’s a bit easier right now. Toronto is an expensive city, but with rents stabilizing (and even dipping slightly), tenants are getting a bit of relief. And some are using this moment to step into the housing market. After renting for years, they’ve saved for a down payment and realized that homeownership means building equity instead of throwing money at rent. With mortgage rates lower and condo prices stable, some renters see their opportunity to buy.

Move-Up Buyers

The price gap between houses and condos is widening. This isn’t surprising—Toronto has a far greater supply of condos than houses. Demand for single-family homes remains high, and prices have held steady since peaking in 2022. Meanwhile, condo prices have dipped slightly, and with growing inventory, downward pressure remains. For those wanting to move from a condo to a house, now may be the time before the gap widens even further.

If you’re buying and selling in the same market, timing is everything. In a hot market, buying is tough, but selling is easy. In a cooler market, it’s the opposite—you can buy with less competition, but selling may take longer. One side of the transaction will always be trickier than the other.

Risk-Taking Investors

Now, this might be controversial, but some investors are buying resale properties. They’re a minority, but they exist. Why? Because uncertainty creates opportunity. Some investors believe that the best deals happen when the market is in flux. They strike when others hesitate, knowing that downturns don’t last forever. Of course, other investors prefer to play it safe, waiting for the market to rebound before jumping in. That’s a valid strategy too, though timing the turnaround is tricky. If the market recovers quickly, the best deals could disappear overnight.

Right now, there’s no rush. Although condo inventory fell between October and December of last year, it’s building again. With more supply on the way, we’re unlikely to see a rapid turnaround just yet.

The Market Never Stops

No matter the conditions, people will always buy and sell real estate. The Toronto market doesn’t freeze—it ebbs and flows. Life goes on. People get married. They get divorced. They have kids and need more space. They adopt a dog that needs a yard. They downsize and spend their winters in Portugal. They grow tired of their neighbourhood and crave a fresh start. They diligently save for a down payment and decide it’s time to stop renting. These factors won’t change, regardless of the market.

Slower periods eventually lead to heating-up phases. When demand builds up during a market lull, it often bursts forth when conditions improve. For now, we wait and see where 2025 takes us.