Toronto and Ottawa Real Estate Markets: A Tale of Two Cities
As of May 2025, the Canadian real estate landscape is continuing to adjust to a shifting economic and policy environment. In two of Ontario’s most closely watched markets—Toronto and Ottawa—distinct market dynamics are emerging.
Toronto, long the juggernaut of Canada’s real estate market, is currently experiencing a cooling period.
Meanwhile, Ottawa is displaying signs of modest but stable growth, positioning itself as a steadier alternative for homebuyers and investors.
Toronto Real Estate Market: A Transitional Period Favoring Buyers
Market Overview
Toronto's real estate market in early 2025 is best described as transitional.
After years of strong appreciation, home prices and sales volumes have softened significantly.
The Greater Toronto Area (GTA) saw home sales drop by 27.4% year-over-year in February, totaling just over 4,000 transactions.
This slowdown reflects a combination of affordability pressures, tighter mortgage lending conditions earlier in the year, and broader economic concerns.
The average home price in the GTA now stands at $1,084,547, marking a 2.2% decline compared to May 2024.
While this is not a dramatic drop, it indicates a plateauing market that may be settling into a new normal after the rapid price escalations of the COVID-era boom.
Interest Rates and Economic Influence
Interest rates are playing a key role in shaping the current environment.
The Bank of Canada lowered its benchmark rate to 3% in January 2025, a move intended to stimulate consumer spending and investment as inflation rates began to stabilize.
Although lower rates have somewhat improved borrowing conditions, buyer activity remains cautious.
Lingering inflation, job market uncertainty, and geopolitical instability have led to lower consumer confidence, especially among first-time buyers and investors.
The result? Many potential buyers are adopting a “wait-and-see” approach, especially in high-cost urban centers like Toronto.
Inventory Growth and Market Conditions
One of the most notable changes in Toronto’s real estate market is the rise in available inventory.
New listings in January surged by nearly 49% year-over-year, providing more choice for buyers and increasing the average time homes spend on the market.
This supply-side increase, without a matching rise in demand, is creating favorable conditions for buyers—particularly those who are well-capitalized and prepared to act quickly.
Detached homes have remained relatively resilient, with average prices ticking up slightly to around $1.45 million, while condo units—especially in downtown cores—are facing price softening due to oversupply and declining investor demand.
Strategic Implications for Buyers and Sellers
Buyers: This is a good time for negotiation. Buyers with pre-approved financing can capitalize on longer listing times and motivated sellers.
Sellers: Pricing strategy is crucial. Overpricing homes in this market could result in stagnant listings and price reductions.
Ottawa Real Estate Market: A Picture of Stability
Market Overview
Ottawa, by contrast, is experiencing more stable conditions.
While it hasn’t seen the explosive growth of Toronto, it also hasn’t experienced the same level of volatility.
In February 2025, the average sale price in Ottawa reached $669,945, up .9% year-over-year.
The benchmark price rose by 4.4%, signaling continued—but measured—growth.
This stability is partially due to Ottawa’s economic base, which is heavily influenced by public sector employment.
The relative job security in federal government and tech-sector jobs continues to support a healthy demand for housing.
Interest Rates and Buyer Behavior
Mortgage rates in Ottawa remain modestly higher than those in Toronto, with a typical 3-year fixed rate hovering around 3.87%.
While not prohibitively high, these rates still make affordability a concern for some buyers, particularly first-time entrants to the market.
That said, Ottawa buyers tend to be more financially conservative, and as such, the market has not seen the same levels of speculation or investor-driven activity.
This conservatism contributes to its stability and resilience during economic fluctuations.
Inventory and Sales Activity
Ottawa saw a 14% increase in new listings in early 2025 compared to the five-year average, giving buyers more options without tipping the market into oversupply.
The sales-to-new-listings ratio (SNLR) sits at 49%, indicating a balanced market where neither buyers nor sellers hold a clear advantage.
Strategic Implications for Buyers and Sellers
Buyers: With a balanced market, it's important to act decisively but prudently. Opportunities exist, particularly in the townhouse and single-family segments.
Sellers: Ottawa’s market supports well-priced homes. Strategic renovations and staging can help secure top dollar, particularly in competitive neighborhoods like Westboro or Barrhaven.
Outlook for the Remainder of 2025
Toronto is likely to continue operating in a buyer-friendly mode through the summer and into fall.
While a full-scale recovery in demand may take time, particularly among investors, the market fundamentals remain strong in the long term—especially if interest rates remain stable or fall further.
Ottawa, meanwhile, is expected to maintain its steady trajectory. It is well-positioned for long-term value growth, especially as Canada’s population continues to increase through immigration and urban sprawl begins to reach more affordable satellite communities like Kanata and Orleans.
Final Thoughts
As of May 2025, Toronto and Ottawa present very different real estate environments.
Toronto is transitioning into a more buyer-friendly market with significant supply and softer prices, while Ottawa continues to offer stability and steady appreciation.
For investors and homebuyers, the key lies in recognizing these regional nuances. Understanding market timing, financing conditions, and long-term goals will be crucial for navigating the year ahead in both cities.
