Toronto Real Estate Market Faces Unprecedented Turmoil Amid Tariff Alarm

The real estate market in the Greater Toronto Area (GTA) is experiencing a seismic shift, as a mix of political tension and economic uncertainty leaves buyers and sellers reeling. Many individuals with a stake in the local real estate market are using the March school break as an opportunity to recalibrate their strategies amidst this climate of unpredictability.

February 2025 saw a shocking 28.5% drop in home sales compared to January, according to National Bank of Canada economist Daren King. This slowdown has erased all gains made since June, when the Bank of Canada first lowered its benchmark interest rate in four years. This slump in sales marks the lowest level observed since the financial crisis of 2008, excluding the initial days of the COVID-19 pandemic.

Heightened tensions arising from a trade war with the United States have cast a dark cloud over the housing market. King notes that the threat of American tariffs has caused apprehension among Canadian buyers and sellers alike. Although lower interest rates and fresh changes in mortgage regulations could potentially revitalize sales, experts worry that a softening labor market may limit any rebound.

Sellers are also retreating, experiencing a significant 24.3% decrease in new listings from January. This follows a previous surge of 34.7%, highlighting the uncertainty gripping the market. Active listings have ballooned to their highest level since 2008, indicating a significant shift in inventory dynamics.

Real estate agents from Sotheby’s International Realty Canada, Christian Vermast and Paul Maranger, typically advise against listing family homes during the school breaks. However, they argue that this year's March Break comes at a crucial time when both parties in the market are feeling the weight of the current political landscape.

“There’s a psychological component at play here,” highlights Vermast. “People might take a wait-and-see approach, wondering if they should hold off for the next four years.”

Despite the ongoing turmoil, there are signs that both buyers and sellers are adjusting to the new reality. The drop in sales has led to quicker responses from sellers, who are advised to sell their existing homes before purchasing new ones—a strategy that could provide a sense of security in a more cautious market.

A key area of interest has been the luxury segment of the market. More high-end properties are changing hands, with 30 transactions for homes priced at $4 million or more recorded between January 1 and March 4, mirroring the figures from the previous year. However, overall sales in the GTA plunged 27.4% year-over-year in February, and while new listings rose slightly, the inventory of available homes surged by 76%.

The average home price has also taken a hit, dipping 2.2% from a year earlier to $1,084,547, as reported by the Toronto Regional Real Estate Board (TRREB). TRREB President Elechia Barry-Sproule emphasizes that affordability remains a significant issue for many aspiring homeowners in the GTA.

Looking ahead, uncertainty looms regarding the volume of homes set to hit the market. Analysts anticipate a flood of listings as five-year mortgages, secured at historically low rates in the past, reach renewal this summer. Some homeowners may find it difficult to sustain their current financial positions, leading to increased pressure to sell. Furthermore, job losses could escalate if the ongoing trade tensions result in economic recession.

Interestingly, Maranger predicts a growing trend toward Canadian-made components in renovations. Buyers are likely to become more discerning about materials sourced from within Canada, as domestic craftsmanship may enhance a property's appeal in a potentially turbulent market.

As the Toronto real estate landscape grapples with these myriad challenges, all eyes will be on how the market evolves in the coming months—and whether buyers and sellers can reclaim their footing in an unpredictable environment.