The question on everyone's mind: How’s the Toronto real estate market? The answer? It depends. The market is not moving in a singular direction—it’s diverging depending on property type, location, and buyer demographics. While luxury condos are thriving and freehold homes remain strong in prime areas, the smaller, investor-driven condo market is struggling. Meanwhile, first-time homebuyers and end-users are finding new opportunities as prices adjust. Here’s a breakdown of where the Toronto real estate market stands today, supported by recent reports from The Toronto Star and The Globe and Mail.

Luxury Condos Are Selling, Despite the Broader Condo Slump

While Toronto’s condo market as a whole is facing challenges, luxury condominiums are still performing well. According to a Toronto Star report (“Toronto’s luxury condo market is still going strong despite the condo slump. Here’s why”), high-net-worth buyers are continuing to invest in high-end units, particularly in boutique buildings and premium locations.

Why Are Luxury Condos Resilient?

There are several reasons for this:

Affluent buyers are less impacted by rising interest rates. Unlike investors who rely on financing, luxury condo buyers often purchase with significant cash reserves or lower loan-to-value ratios.
Lifestyle appeal. Downsizers, professionals, and international buyers are still attracted to Toronto’s high-end buildings that offer privacy, security, and top-tier amenities.
Limited supply of premium condos. Developers have focused on larger, well-designed suites in prime neighborhoods, keeping demand steady.
Stable rental demand at the high end. While smaller investor-owned condos are struggling, high-end rental properties remain desirable among executives and expatriates.
Foreign interest and global positioning. Toronto remains a world-class city, and international buyers still see value in its high-end properties compared to other global markets like New York and London.

Luxury condos in neighborhoods like Yorkville, Forest Hill, and Lawrence Park continue to see healthy sales and stable prices, proving that this market segment is resilient even in uncertain conditions.

Shoebox Condos: A Market No One Wants?

While luxury condos remain strong, the small investor-driven condo market is in serious trouble. The Toronto Star and The Globe and Mail both report that investors have exited the market, leading to an oversupply of small condo units that are now sitting on the market longer and seeing price declines.

Why Are Small Condos Struggling?

In The Toronto Star’s investigation (“Investors wreaked havoc on Toronto’s condo market, leaving us with tiny units no one wants”), experts highlight how years of investor-driven development led to the construction of too many compact, inefficient units—many under 500 square feet. These units, once sought-after for short-term rentals or quick resale, are now struggling to attract end-user buyers who prefer larger, more livable spaces.

Factors contributing to this downturn include:

High borrowing costs. Investors who previously dominated the condo market are now priced out due to increased interest rates.
Changing buyer preferences. Many buyers now prioritize space, balconies, and layouts that accommodate work-from-home lifestyles.
Rental market softening. With more supply coming online, rental income isn’t as lucrative as before, making these units less attractive as investments.
Oversupply issues. Many of these units are concentrated in high-rise buildings, leading to high competition among sellers and landlords.
Declining investor confidence. After years of appreciation, investors are now seeing stagnation or price drops, discouraging new purchases.

What Does This Mean for Condo Owners?

For those who own small condos, the options are limited. Some investors are choosing to sell at a loss rather than hold onto underperforming units. Others are lowering rents to attract tenants, leading to diminished returns. If this trend continues, developers may need to rethink future projects and prioritize larger, more functional unit designs.

Freehold Homes: Strong in Prime Toronto, Softer in the GTA

The freehold market presents a mixed picture. In Toronto’s most desirable neighborhoods, freehold homes remain in demand. However, in the broader GTA, sales have slowed, and properties are sitting longer on the market.

According to The Globe and Mail (“In Toronto condo land, the investor buyer has left the building”), detached and semi-detached homes in prime areas like Rosedale, The Annex, and Leaside are still selling relatively quickly. But in the suburbs, where prices soared in recent years, higher mortgage rates have led to a pullback in buyer activity. This has resulted in more listings staying on the market longer and, in some cases, price corrections.

What’s Driving These Trends?

Location still matters. Freehold homes in established, transit-friendly neighborhoods continue to attract buyers despite higher borrowing costs.
Affluent buyers remain active. Wealthier buyers, less affected by rate hikes, continue to transact in top-tier locations.
Suburban slowdowns. Areas that saw explosive growth during the pandemic are now seeing price stagnation or declines.
Interest rate sensitivity. Many would-be move-up buyers are staying put due to high carrying costs on larger homes.

That said, freehold homes continue to hold value better than small investor condos, particularly in the central parts of Toronto, where demand remains steady.

A Window of Opportunity for First-Time Buyers and End-Users

One of the biggest shifts in today’s market is the emergence of first-time buyers and end-users as key players in the condo market. For years, Toronto’s preconstruction and resale condo markets were dominated by investors, but now that prices have adjusted, actual homeowners are stepping in.

Why Are End-Users Gaining Ground?

This is especially significant because, as The Toronto Star reports, condo prices have dropped more in the last two years than they have in decades. For first-time buyers who were previously priced out, this represents a unique opportunity to enter the market without having to compete with flippers and bulk investors.

With investors stepping back, first-time buyers can:

Negotiate better prices and terms.
Buy in more desirable locations that were once dominated by investors.
Find larger units that fit their lifestyle needs better than shoebox condos.

While interest rates remain high, many buyers are banking on future rate cuts that could make carrying costs more manageable in the long run.

Where Does the Toronto Market Go From Here?

The Toronto real estate market in 2025 is fragmented—there is no one-size-fits-all answer to how the market is performing. Here’s a recap of the key trends:

Luxury condos are performing well, with strong demand from high-net-worth buyers.
Small investor-driven condos are struggling, as investors have exited, leaving behind an oversupply of tiny units that are difficult to sell.
Freehold homes are strong in prime Toronto areas but softer in the outer GTA, where higher mortgage rates have slowed demand.
First-time homebuyers and end-users are seizing opportunities, with condo prices having dropped significantly, making homeownership more attainable than in previous years.

Ultimately, whether it’s a good time to buy or sell depends on your specific goals, the property type, and the location. If you’re considering making a move, working with an experienced realtor who understands these nuances is key.

Have questions about the market? Let’s connect and find the right strategy for you.

How’s the Toronto Real Estate Market? It Depends.