Toronto’s housing market enters 2026 in a fragile position, and the outlook looks very different depending on whether you’re looking at the resale market or the pre-construction sector. In both cases, the next year is more likely to bring further stress than a quick recovery.
Resale Market: Low Confidence Meets Rising Supply
Most housing analysts now agree that the resale market is likely to weaken further before it stabilizes. The reason is simple: demand remains suppressed while supply is quietly building.
Demand: Low Consumer Confidence Is the Problem
Last year, GTA home sales fell to their lowest level in 25 years. Interest rates played a role, but the bigger force keeping buyers on the sidelines has been economic uncertainty and collapsing consumer confidence.
Much of that uncertainty originally came from fears about U.S. tariffs and the future of Canada–U.S. trade. But today, the risks are broader and more unsettling. The United States is now at the center of multiple geopolitical flashpoints, including tensions with NATO allies. The U.S. Department of Justice has brought criminal charges against the Federal Reserve, raising serious questions about the future independence of the world’s most important central bank. And domestically, the U.S. is experiencing sustained political unrest, with protests over the actions and tactics of immigration enforcement agencies spreading across major cities.
These aren’t abstract risks. They directly affect global financial markets, investment flows, and household confidence in Canada.
Many hoped that a trade agreement between Canada and the U.S. would ease tensions, but such a deal does not appear to be a priority for the current U.S. administration. As a result, businesses and households are left making long-term decisions in an unusually unstable environment.
In that kind of climate, people don’t rush out to make the largest purchase of their lives. Even if mortgage rates drift lower, uncertainty acts like a psychological rate hike. It keeps buyers cautious, patient, and on the sidelines.
Supply: Sellers Are No Longer Willing to Wait
On the supply side, the psychology has shifted. In past downturns, sellers tended to wait for better prices. In 2026, many now fear that waiting may lead to even lower prices.
That means more homeowners are choosing to sell sooner rather than later, adding listings to a market where demand is already thin. At the same time, mortgage arrears and power-of-sale listings are likely to rise as households that stretched to buy during the pandemic struggle to keep up with today’s still-elevated interest rates.
Put together, weak demand and rising supply create exactly the conditions that put further downward pressure on prices, for both houses and condominiums.
Pre-Construction Condos: A Market That Has Broken
The pre-construction condo market didn’t just slow down in 2025 — it collapsed. Sales fell to the lowest level on record, going all the way back to 1981, when Altus first began tracking new-home sales.
This wasn’t a normal cyclical downturn. It was the unwinding of an investor-driven bubble.
For years, the entire pre-construction market was propped up by investors willing to pay prices that only made sense if rents and resale values kept rising forever. As with every speculative bubble, once expectations shifted, demand disappeared almost overnight.
Unlike resale sellers, builders can’t simply cut prices to move product. Most of their costs — land, development charges, financing, construction contracts — are locked in. Lower prices would make many projects economically impossible, so projects get delayed, cancelled, or shelved instead.
The federal government has floated the idea of lifting the foreign-buyer ban, something the building industry has been lobbying for. Proponents argue this would boost construction. In reality, it would mainly support higher prices by allowing foreign capital to step in and outbid local buyers.
That kind of policy would be deeply unpopular with Canadians who want to see homes go to families, not offshore investors. And even if the ban were lifted, it would not fix the core problem: the pre-construction market is priced far above what end-users can afford.
The Bottom Line
Toronto’s housing market is now being shaped less by interest rates and more by confidence, debt, and who housing is actually being built for.
In 2026, the resale market is likely to remain under pressure as cautious buyers meet a growing pool of motivated sellers. The pre-construction market, meanwhile, is still searching for a floor after the investor-led boom finally broke.
Real recovery won’t come from a rate cut or a policy tweak. It will come when housing prices realign with what local incomes can support, and when homes once again look like places to live, not just vehicles for speculation.
John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).
Have questions about your own moves in the Toronto area as a buyer, seller, investor or renter? Book a no-obligation consult with John and his team at a Realosophy here: https://www.movesmartly.com/meetjohn
January 13, 2026
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