Toronto Home Prices Are Down in 2026—Is This the Best Buying Opportunity in Years?

The Toronto real estate market just handed buyers something they haven’t seen in over a decade: actual negotiating power. January 2026 numbers from the Toronto Regional Real Estate Board show the average home price dropped to $973,289, down 6.5% from last year. For the first time since the pandemic buying frenzy began, sellers are the ones feeling pressure instead of buyers.

But here’s the question everyone at Innovative Property Solutions is hearing from clients: is this drop a genuine buying opportunity, or are prices still falling? The answer depends entirely on whether you’re buying to live in the home or buying as an investment, because these two groups are looking at completely different realities right now.

The Numbers Behind the Drop

Let’s start with what actually happened to Toronto home prices. The $973,289 average represents a real decline, not just a statistical blip. This isn’t prices rising slower than usual. Values actually fell compared to twelve months ago, which hasn’t happened consistently since the brief pandemic dip in early 2020.

The TRREB 2026 Market Outlook projects continued softness through the first half of this year, with prices likely to stabilize rather than rebound dramatically in the second half. Translation: if you’re waiting for prices to crash another twenty or thirty percent, that’s probably not happening. But if you’ve been priced out of Toronto for years and want a realistic entry point, this might be it.

The decline isn’t evenly distributed across property types or neighbourhoods. Condos have dropped more than detached homes in most areas. Properties requiring significant work or updates have fallen further than move-in-ready homes. Neighbourhoods that saw the most extreme appreciation during 2020 and 2021 have generally given back more of those gains.

From an appraisal perspective, this creates complexity. When we value properties now at Innovative Property Solutions, we’re seeing a wide variation in how much individual homes have declined. Two seemingly similar houses can show very different value changes depending on their specific features, condition, and location within the broader Toronto market.

Why Buyer Psychology Has Shifted

The market mood has completely flipped. For years, Toronto buyers operated from a position of desperation. You had to offer over asking, waive conditions, and accept that you’d probably overpay just to get anything. Multiple offer situations were standard. Sellers held all the cards.

That dynamic has reversed. Buyers now routinely offer below asking prices and negotiate terms. Properties sit on the market for weeks or months instead of selling in days. Sellers who price too aggressively get no showings, while those pricing realistically still face tough negotiations.

This psychological shift matters as much as the price decline. Buyers who felt rushed and pressured for years now have time to think, compare options, and make rational decisions. You can actually tour multiple properties, consider your choices, and make offers without feeling like you’re in a bidding war against twenty other desperate buyers.

The fear of missing out that drove so much irrational buying behaviour has evaporated. Nobody worries anymore that if they don’t buy today, prices will be ten percent higher next month. If anything, some buyers are paralyzed by the opposite fear that prices might drop further if they buy now.

The Investor Exodus Creates Opportunity

Here’s where things get interesting for buyers. A significant portion of the current selling pressure comes from investors who bought during the peak and are now bleeding money every month. These aren’t patient, long-term holders. They’re people who stretched to buy investment properties, assuming prices would keep rising and rents would cover costs.

Neither assumption proved correct. Prices declined instead of rising. Rental rates haven’t kept pace with mortgage costs, especially with interest rates where they’ve been. Many investors are losing a thousand dollars or more monthly on negative cash flow properties. Some held on, hoping the market would turn around. By 2026, many have given up and are selling at a loss rather than continuing to hemorrhage cash.

This creates a genuine opportunity for buyers, particularly those buying homes to live in rather than as investments. You’re competing against motivated sellers who need to exit positions that aren’t working financially. These sellers will negotiate. They’ll accept reasonable offers. They understand the market has changed, and they need to adjust expectations.

The properties these investors are selling aren’t damaged goods. They’re often perfectly fine homes that just don’t work as investments at current rent levels and interest rates. For an owner-occupant who doesn’t need positive cash flow, these properties represent the same housing value they always did, just at lower prices than two years ago.

The 2029 Supply Crunch Nobody Is Talking About

While everyone focuses on current price declines, a critical supply problem is building that will likely reverse this buyer’s market sooner than most people expect. New condo project launches fell 25% in 2026 compared to previous years. This isn’t just a small dip. It’s a massive reduction in new supply entering the pipeline.

Why does this matter? Because projects launched in 2026 won’t be completed and available for occupancy until 2029 or later, given typical construction timelines. Toronto is setting itself up for a severe condo shortage three years from now when the projects that should be launching now simply won’t exist.

The math is straightforward. Toronto keeps growing. Immigration continues. Household formation keeps creating demand for housing. But the supply being built today isn’t keeping pace with the demand that will exist in three years. When that supply gap hits, prices will respond exactly as you’d expect when many buyers compete for limited inventory.

This creates a timing consideration for buyers. If you purchase now at current prices and the 2029 supply crunch pushes values up significantly, you’ll have bought at what turns out to be a relative low point. If you wait, hoping for further declines and the market starts recovering in late 2027 or 2028 as the supply shortage becomes apparent, you might miss the buying opportunity entirely.

From an appraisal standpoint, we’re already seeing investors and developers factor this future supply constraint into their current buying decisions. Savvy investors who exited the market during the decline are starting to look at re-entry points, specifically because they understand the supply dynamics that will affect values in the coming years.

What Owner-Occupants Should Consider

If you’re buying a home to live in, not as an investment, the current market offers advantages that won’t last indefinitely. Here’s what actually matters for your decision.

Negotiating leverage gives you the power to get fair prices and reasonable terms. Sellers can’t ignore sensible offers when properties sit on the market for extended periods. You can include conditions for inspections and financing without automatically losing out to unconditional offers. This protection matters enormously for avoiding expensive mistakes.

Selection and time mean you can actually find the right home instead of settling for whatever you can get in a bidding war. You can compare neighbourhoods, evaluate different property types, and make thoughtful decisions without artificial time pressure. This alone makes the current market valuable for buyers who care about getting housing that truly fits their needs.

Mortgage qualification is easier when prices are lower. A $973,289 average price requires a smaller mortgage than when averages approached a million or exceeded it. Even with current interest rates, the lower purchase price means your income goes further in qualifying for the home you want.

Long-term value perspective matters more than short-term price movements when you’re buying a home to live in. If you’re planning to own the property for ten or fifteen years, whether you bought at the exact bottom or six months before the bottom becomes irrelevant. What matters is securing housing at a price you can afford that meets your family’s needs for the long term.

The psychological trap many potential buyers fall into is waiting for the absolutely perfect moment. They want confirmation that prices have hit the absolute bottom before buying. But markets don’t work that way. By the time everyone agrees prices have bottomed, they’ve already started rising again. The best buying opportunities come when uncertainty still exists, and not everyone is convinced the bottom has arrived.

What Investors Need to Think About Differently

Investment buyers face a completely different calculation than owner-occupants. The same market conditions create different opportunities and risks depending on whether you need the property to generate positive cash flow immediately or can hold for longer-term appreciation.

Cash flow reality remains challenging. Rental rates in Toronto haven’t increased enough to offset the higher interest rates and prices investors face. If you’re borrowing heavily to purchase investment property, you’ll likely face negative cash flow for the foreseeable future. You need sufficient reserves to cover these monthly losses while waiting for market conditions to improve.

The investor exodus we discussed earlier creates opportunities specifically for buyers with strong balance sheets who can carry properties through the current negative cash flow period. Properties are available at prices that may look attractive five years from now, but only if you can sustain the carrying costs until rental rates rise or until you can sell at a gain.

The 2029 supply gap represents the key thesis for investment buyers. If you believe Toronto will face a significant housing shortage three years from now when the current development pipeline gaps hit, buying now positions you to benefit from the price appreciation that shortage will likely cause. This is a bet on future supply and demand dynamics, not current cash flow.

Tax implications affect investment returns significantly. Negative cash flow creates tax deductions that offset other income. Capital gains when you eventually sell are taxed favourably. Understanding the complete tax picture helps determine whether a particular investment property makes sense despite negative cash flow. This is where working with both qualified appraisers at Innovative Property Solutions and experienced tax accountants becomes valuable.

The investors succeeding in the current market aren’t the ones who bought, hoping for quick flips or easy positive cash flow. They’re buyers with long-term horizons, strong financial positions, and a willingness to ride out the current negative cash flow period in exchange for potential appreciation when supply constraints tighten the market again.

Geographic Variation Across the GTA

The overall Toronto average price decline masks significant variation across different areas and municipalities. When we appraise properties across the GTA at Innovative Property Solutions, we see very different market conditions depending on the specific location.

Downtown Toronto condos have dropped more sharply than the overall market average. Some buildings have seen declines exceeding ten percent from peak values. The concentration of investor-owned condos in downtown areas means more distressed sales from negative cash flow situations.

North Toronto neighbourhoods with detached homes have held values better than condos and showed smaller percentage declines. These areas attract more owner-occupant buyers and fewer investors, creating more stable demand even when investment buying disappears.

Mississauga and Vaughan have experienced their own price adjustments, though patterns differ from Toronto proper. Some Mississauga neighbourhoods near transit have held up well, while others, more car-dependent, have softened more noticeably. Vaughan’s newer developments have seen varied performance based on project quality and location.

Markham and Richmond Hill markets reflect their demographic composition, with certain areas maintaining strength due to sustained demand from specific buyer pools, while other areas have adjusted downward more in line with broader market trends.

This geographic variation means your personal buying opportunity depends heavily on where specifically you’re looking. The average decline tells you about overall market direction, but says little about the exact neighbourhood or building where you might actually purchase.

The Interest Rate Reality

We can’t discuss Toronto home prices without acknowledging interest rates, because mortgage costs drive affordability as much as purchase prices do. Even with prices down 6.5%, affordability hasn’t improved dramatically for buyers who need mortgages because rates remain elevated compared to the pandemic era lows.

The Bank of Canada’s rate decisions through late 2025 and early 2026 have created an environment where mortgage qualification is tougher than price declines alone would suggest. A buyer who could have qualified for a $900,000 mortgage at 2.5% interest might only qualify for $650,000 at current rates, even though monthly payments are similar.

This rate reality explains why some buyers remain priced out despite the 6.5% price decline. It also explains why sellers have had to reduce prices so significantly just to find qualified buyers. The buyer pool has shrunk, not because people don’t want to buy, but because fewer buyers can qualify for the mortgages needed at current rate levels.

Looking forward, any future rate reductions by the Bank of Canada would likely trigger increased buying activity and stabilize or increase prices. This creates another timing consideration. Buyers who wait, hoping for lower prices, might instead see rates drop, which increases competition and pushes prices back up before they drop further.

What Appraisals Tell Us About Market Reality

As appraisers, we see the market’s actual mechanics through the properties we value. The current market shows specific patterns that help explain what’s really happening beyond the headline price decline numbers.

Well-maintained, move-in-ready homes in good locations are still generating multiple offers and selling close to or at asking prices. The weakness exists primarily in properties requiring work, those in less desirable locations, or those priced aggressively by sellers who haven’t accepted market changes.

Properties with unique features or problems are taking much longer to sell and requiring larger price reductions. In a hot market, buyers overlook issues because they fear missing out. In a buyer’s market, every flaw becomes a negotiating point and reason for lower offers.

The spread between list prices and sale prices has widened significantly. Sellers often list at prices that would have worked in 2022 or 2023, then reduce multiple times before finding buyers. Smart sellers price realistically from the start and attract serious buyers immediately.

Appraisal gaps between expected values and actual sale prices have decreased compared to the hot market years when properties regularly sold above appraised values. Now properties typically sell at or slightly below appraised values, which is actually a return to normal market conditions rather than an indicator of market weakness.

Making Your Decision

So is this the best buying opportunity in years? The answer depends entirely on your situation, timeline, and whether you’re buying as an owner-occupant or investor.

For buyers planning to live in the property, this represents the best market conditions since before the pandemic. You have negotiating power, selection, time to make decisions, and prices that are lower than they’ve been in years. The risk of waiting for further declines is that you might miss the opportunity entirely if the market stabilizes or recovers before you act.

For investors, the opportunity exists but requires patient capital and the ability to sustain negative cash flow. The 2029 supply gap thesis makes logical sense, but it’s still a bet on future events. You need to understand your risk tolerance and financial capacity to carry properties through the current market weakness.

For everyone, working with professionals who understand current market realities helps you make informed decisions. At Innovative Property Solutions, we provide accurate property valuations that reflect true current market conditions across Toronto, Mississauga, Vaughan, Markham, and throughout the GTA. Whether you’re buying, selling, refinancing, or just trying to understand your options, a professional appraisal gives you the facts you need to decide confidently.

The Toronto market has shifted dramatically. Prices have declined. Buyers have power they haven’t held in years. But opportunity doesn’t come with a flashing sign that says “buy now.” It comes disguised as uncertainty and requires making decisions without perfect information about future price movements.

The buyers who will look back on 2026 as a great opportunity are the ones who recognize that reasonable prices, good selection, and negotiating leverage matter more than trying to time the absolute market bottom. Contact Innovative Property Solutions to discuss your specific situation and learn how a professional appraisal can support your real estate decisions in this changed market.