Rental prices are softening and new inventory is boosting supply, making renting more attractive for some.Fred Lum/The Globe and Mail
Eroding prices are enticing many aspiring buyers back into the Toronto-area real estate market, but the recovery has been tempered by the folks heading the other way.
Todd Skinner, real estate agent with Chestnut Park Real Estate, believes that factors beyond economic uncertainty and declining population growth are hampering the upturn that many pundits were predicting at the start of 2026.
One key element weighing on sales is the shift toward rental accommodation, Mr. Skinner notes.
Rental prices are softening due to fewer international student visas, lower overall immigration levels and migration from Toronto to more affordable cities in other provinces, he says.
Meanwhile, new inventory in recently built condos and purpose-built rental towers adds to a swell in supply.
Mr. Skinner notes that economic and geopolitical turbulence is also unsettling to sellers and buyers.
“People are not certain about how to forge ahead. That opens the door for renting as well.”
Wave of purpose-built rental units gives tenants an edge in changing market
Data from the Toronto Regional Real Estate Board show that 58 per cent of transactions in the first quarter were for rentals compared with 30 per cent in the same period in 2020.
In midtown Toronto, where Mr. Skinner concentrates much of his business, many baby boomers and Gen-Xers are choosing to rent after downsizing from large homes, he adds.
Among his own clients, many have second homes outside the city. Some are keeping those properties while they sell a primary residence and rent in Toronto.
The first wave of boomers is turning 80, he notes; some in the cohort behind them want to spend more time travelling.
“I think they have the funds to make their choices,” he says of people who have benefited from a long-term gain in real estate values.
“The people turning 60 are scaling back their hours and commitment to work,” he adds.
Upscale rental buildings such as The James at 10 Price St. appeal to downsizers with deep pockets, he says. New luxury condo buildings such as 50 Scollard St. and 88 Cumberland St. have lots of supply from owners trying to rent out their units, he adds.
Sales activity appears to be slightly more brisk in June than in May, says Mr. Skinner.
Toronto home sales rise for third straight month in May
The Toronto area resale market in May was not as buoyant as many agents were hoping – despite an improving trend for three months in a row, says Dino Capocci, real estate agent with Royal LePage Real Estate Services.
TRREB numbers show sales rose 10 per cent in May from April on a seasonally-adjusted basis.
Despite the uptick, the activity was the third weakest for the month of May since 2000, notes Daren King, senior economist at National Bank of Canada.
The recent rise in sales largely stems from improved affordability over the past few quarters due to the drop in property values, in the opinion of Mr. King, who estimates Toronto home prices have fallen about 20 per cent from the milestone set in 2022.
New listings edged down in May from April but remain high on a historical basis, says Mr. King.
Mr. Capocci notes that there are not as many buyers today as during the frenzied market run-up.
He has recently been working with one young couple looking for a rental in Yorkville’s luxury condo buildings.
“They’ve been sitting,” he says of the recently completed suites. “They have the pick of the litter.”
Downsizers, too, are more willing to rent, he says.
Monthly national home sales up 5.5% in May as market strengthens
Buyers who are circulating have plenty of leverage as a result, says Mr. Capocci, but research and lengthy negotiations are necessary to wrangle a deal together.
Mr. Capocci delves into the sales history to find out how long sellers have owned the home and what they paid.
In some cases, homeowners are selling for less than they paid as far back as 2017.
Mr. Capocci points to one house in the Moore Park area which was listed with an asking price of $2.699-million before it was eventually reduced to $2.495-million.
The homeowners paid $2.51-million several years ago.
“That tells me they are not testing the market,” says Mr. Capocci. “They need to sell.”
He adds that agents need to lay the groundwork before submitting an offer substantially below the asking price.
Recently, Mr. Capocci was preparing to submit an offer for a two-bedroom, two-bathroom condo listed above $2.5-million at Avenue Road and Bloor Street.
Mr. Capocci’s research suggested an offer around the $2.2-million mark was a realistic opening bid for the unit with approximately 1,850 square feet of living space at 38 Prince Arthur Ave.
“You always have a good conversation with the listing agent and tell them where you’re coming from,” he says.
On occasion, listing agents are not encouraging. They may know the seller’s frame of mind, for example, or the offers they have already rejected. They may suggest the seller may be more amenable in a few weeks.
But in many cases, they press for a written offer.
Luxury Toronto home sells for nearly $1-million under 2025 asking price
If the buyers decide to forge ahead, Mr. Capocci prepares a missive to support his price, with recent sales of comparable properties included. He may point out that a property is tenanted, for example, which increases the risk for the potential buyers that the deal will run into problems on closing.
Typically, listing agents have a conversation with the seller to explain where the buyers are coming from.
“That’s how the deals are happening. Everyone has to be reasonable.”
National Bank economists Kyle Dahms and Evelyne Gosselin point out that housing affordability improved in the GTA for the ninth consecutive quarter in the first quarter of 2026.
“This marks the longest period of affordability improvement ever recorded in the city,” the economists report, attributing the shift to rising incomes and falling prices, which more than offset the slight increase in mortgage rates.
Still, the Toronto market remains highly unaffordable, which may limit the recovery in sales, according to National Bank.
Mr. King notes that cumulative sales for the first five months of 2026 slipped 0.8 per cent compared with the same period in 2025, representing the weakest beginning of the year since 1998.
Some sellers are wondering if the delayed spring market this year means that the traditional summer pause will come later than usual.
“I may be going out on a limb,” says Mr. Capocci, “but I think it’s going to slow down again as soon as June is over.”