Toronto Housing Market Forecast 2026: Condos Falling, Detached Holding, and What It Means for First-Time Buyers

The Toronto housing market in 2026 is not behaving as one unified market. It is behaving as two separate markets that happen to share a city — and the experience of a buyer differs dramatically depending on which segment they are in.

Freehold detached homes are holding near record-high prices, buoyed by chronic supply constraints and renewed demand from buyers who can now access CMHC insurance up to $1.5 million. Condominiums are declining — down 9.5% year-over-year as of May 2026 — with record-high inventory giving buyers a rare negotiating position they have not seen in years.

Current Market Data (May 2026)

According to Toronto Regional Real Estate Board (TRREB) data for May 2026:

Freehold detached homes:

• GTA average detached price: $1,358,131
• City of Toronto (416): $1,610,988
• Surrounding 905 regions: $1,268,625

Condominium apartments:

• GTA average condo: $639,468 (down 9.5% year-over-year)
• City of Toronto: $673,841
• 905 suburbs: $573,531

Inventory:

• Over 6,600 active condo listings in Q1 2026 across the GTA
• Sales-to-new-listings ratios below 50% in the condo sector — indicating a buyers' market by standard definitions

For context, a balanced condo market typically operates with a sales-to-new-listings ratio of 40% to 60%. Below 40% favors buyers significantly. Above 60% begins to favor sellers and drive prices upward. The current readings suggest condo buyers have meaningful pricing power for the first time since before the pandemic.

Why Condos Are Declining

Several overlapping factors are driving the condo correction:

1. Investor withdrawal. A substantial portion of Toronto condo inventory is investor-owned. With carrying costs exceeding rental income in many cases — a scenario known as negative cash flow — investors who bought pre-construction units at 2021 and 2022 prices are now choosing to sell rather than continue subsidizing underperforming assets. This is flooding the market with supply.

2. Pre-construction completions. A wave of towers that broke ground during the 2019-2022 construction boom are now completing and registering. Each registration brings a new inventory event as investors who bought off-plan either rent out or list their units.

3. Rental market softening. As more purpose-built rental stock comes online and immigration patterns shift, the rental market in downtown Toronto has moderated from its 2023-2024 peak. Investors who relied on strong rental income to carry their mortgages are seeing that income compressed.

4. Condo-to-mortgage affordability gap. Even at $640,000, a Toronto condo still requires significant income to pass the stress test and carry the mortgage alongside maintenance fees and property taxes. Buyers at the income level where condos are within reach are the same buyers who feel most squeezed by the stress test.

Why Detached Homes Are Holding

The $1.5 million CMHC cap change is the most structural driver for the freehold segment. Before December 2024, any property priced above $1 million required a mandatory 20% down payment — a hard threshold of $200,000+ in liquid cash. This effectively excluded first-time buyers from the 905 detached market, where most homes fall in the $1 million to $1.4 million range.

With the new insured mortgage cap at $1.5 million, buyers who previously needed $260,000 (20% of $1.3 million) can now enter with $65,000 to $130,000 down and CMHC insurance. This has unlocked a substantial cohort of buyers — particularly dual-income couples earning $150,000 to $200,000 — who previously had no path into the freehold 905 market.

Supply constraints. The detached market in the GTA has not seen material new supply in decades. Zoning restrictions, infrastructure costs, and the sheer lack of infill land in established municipalities keep inventory chronically tight. Demand shocks from policy changes (like the CMHC cap) hit a market with very limited supply response.

What Buyers in Different Segments Should Know

For Condo Buyers (Most First-Time Buyers)

You are in the strongest negotiating position in years. In a market with over 6,600 active condo listings and declining prices, sellers are competing for buyers — not the reverse. Practically, this means:

• Price negotiations are possible. Offering 2% to 4% below asking on a well-priced unit is not aggressive in the current environment.
• Conditions are back. In competitive markets, buyers waived financing conditions and inspection conditions to win. In the current condo market, including these conditions is standard again — and sellers accept them.
• Carrying cost math is critical. Declining prices help, but maintenance fees and property tax still exist. A $640,000 unit with a $750/month maintenance fee may have a worse monthly cash position than a $690,000 unit with a $480/month fee. Model the full carrying cost.
• Pre-construction risk is elevated. Investors who bought units in 2020-2022 at prices that now exceed current resale market values are in a difficult position. Some pre-construction buildings nearing completion have buyers trying to assign (sell) their purchase contracts before closing. This creates an assignment market where you may find below-market prices on new units, but also buyer-protection risks that require careful legal review.

For Freehold Buyers

The policy change that enabled insured mortgages up to $1.5 million was designed precisely to bring dual-income couples into the 905 freehold market. If you and your partner earn a combined $180,000 to $220,000 and can assemble 10% down on a $1.1 to $1.3 million townhouse or semi-detached, you are now able to enter this market with CMHC-insured financing where previously you could not.

The tradeoff is the CMHC premium. On a $1,200,000 purchase with 10% down, the base mortgage is $1,080,000. At the appropriate insurance rate (note: CMHC rates and eligibility for properties in the $1M-$1.5M range have specific conditions — confirm with your broker), the premium adds materially to the total mortgage principal.

For Buyers Considering Ottawa or Secondary Markets

Ottawa's average price of $712,184 — with townhouses at $556,172 and condos at $425,935 — offers a substantially more accessible entry point. Hamilton's average of $737,600 with condo averages around $381,000 presents a similar picture. For buyers with flexibility on location, particularly remote workers, the secondary market math is significantly more favorable.

The Rate Environment

The Bank of Canada's overnight rate sits at 2.25% in mid-2026, reflecting continued easing from the aggressive tightening cycle of 2022-2023. The five-year fixed mortgage rate environment of 4.09% to 4.89% represents a substantial improvement from the 5.5% to 6% rates that characterized 2023 and early 2024.

The lower rate environment improves qualification capacity. A buyer who could afford a $500,000 mortgage at 5.75% qualifying rate can now afford more at lower rates — but the stress test still adds 200 basis points to any actual rate, maintaining meaningful compression.

Variable rate mortgages, priced relative to the prime rate (approximately 4.45%), are currently competitive with fixed rates and carry the possibility of further rate cuts if economic conditions soften. For first-time buyers at the edge of their GDS ratios, the payment certainty of a fixed rate often outweighs the potential savings of a variable.

The Realistic Forecast for 2026-2027

The condo correction appears likely to continue through 2026 before finding a floor, driven by the continued completion wave from the construction boom. Modest recovery in condo prices is more likely in 2027 if interest rates continue to decline and the CMHC policy change starts absorbing demand that would otherwise go to condos.

Detached prices in the GTA will remain structurally supported by the supply-demand imbalance and the new CMHC policy. Significant price growth requires either material rate decreases or a supply shock that the current regulatory environment makes unlikely.

For first-time buyers in Ontario's housing market, the current condo environment represents one of the better entry windows in the past decade from a negotiating power perspective. The question is whether the unit, the building, and the carrying costs align with your financial position.

The Ontario First-Time Home Buyer Guide includes current market positioning guidance alongside the full purchase process framework for Ontario.

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