Real estate in the Greater Toronto Area has entered correction territory as tariffs and the current geopolitical situation are weighing on home buying activity, according to one real estate CEO.
The Toronto Regional Real Estate Board said in a release Wednesday that home sales fell 13.3 per cent on an annual basis in May, with 6,244 homes changing hands. New listings reached 21,819 during the month, marking a 14 per cent increase from the previous year.
“Certainly, the first quarter of 2025, we anticipated a stronger real estate market, but the geopolitical situation and certainly the tariff climate paused the market in a way that we hadn’t anticipated. So, I would say that we’re in a market correction,” Cailey Heaps, the president and CEO of Heaps Estrin Team, said in an interview with BNN Bloomberg Wednesday.
She added that the sub $2.5 million segment of the market is the most active at this time, as it is less influenced by the political climate where demand is often “lifestyle driven” with buyers looking to get into the market to address housing needs for themselves or their family.
“Consumer confidence was certainly challenging in Q1, but we’ve seen it improve with the change in our leader. And the people who are buying in that sub $2.5 (million) market are typically motivated beyond what’s happening in the political climate,” Heaps said.
“The encouraging aspects in that segment of the market is obviously pricing is improved. Affordability is improved with the interest rate climate, and there’s more options for them to buy.”
In contrast, she said buyers in the next segment of the market, with homes priced between $2.5 million and $8 million, are often already housed and have the ability to wait and be more selective with purchases.
“We’re still seeing transactional volume in that segment, but it’s gone down,” Heaps said.
Interest rates
Following two consecutive Interest rate pauses from the Bank of Canada, Heaps said interest rate fatigue has permeated the Toronto real estate market.
“Buyers are sort of tired of talking about it. They know that it’s more affordable now, we understand that housing in general is more affordable in Toronto. So, it used to be that interest rates were part of my daily vernacular, and that’s definitely changed,” she said.
On Wednesday, Canada’s central bank announced a hold in its key policy rate at 2.75 per cent amid persisting tariff uncertainty.
Condos
With respect to Toronto’s condo market, Heaps said there are challenges, but investors will re-enter the market under the right borrowing conditions.
The sharpest decline in home sales during the month of May was seen in condo segment of the market, with 25.1 per cent fewer properties sold.
“The condominium market is certainly challenging. There’s so much inventory in the city. There’s over 30,000 active listings in the Toronto Real Estate Board right now,” she said adding that it is currently a “difficult market.”
Heaps said interest rates have impacted the overall market, which is likely to remain this way into next year.
“In the right interest rate environment, the investors will come back to market, and that will help with the tiny units…eventually everything sells. It’s just a matter of time,” she said.
With files from The Canadian Press.
