There is a strange little contradiction in Toronto real estate. For the past four years, we’ve heard more and more about how unaffordable Toronto has become. And yet, over those same four years, Toronto home prices have come down significantly. Toronto certainly hasn’t become affordable when looking at the big picture. But it has become more affordable than it was. And somehow, that part of the story doesn’t get nearly as much attention.

The affordability paradox

Affordability is about more than the price of a house. It is also about incomes, interest rates, taxes and the cost of everything else you have to pay for. That makes the Toronto affordability story a little more complicated than simply looking at today’s home prices.

The pandemic pushed Toronto housing prices to extraordinary levels. Then interest rates rose sharply, making those homes considerably more expensive to finance. At the same time, food, insurance, transportation and other everyday expenses went up. So while home prices have fallen from their peak, the rest of the household budget hasn’t exactly followed them down. That helps explain the paradox. A house that costs significantly less than it did a few years ago is obviously more affordable. But if borrowing costs and the cost of living have also increased, the improvement doesn’t necessarily feel dramatic to the person trying to buy it.

There is another factor that gets overlooked. Toronto has just gone through a remarkable population whiplash. For several years, the Toronto region was adding people at an extraordinary pace. In 2024 alone, the region added roughly 269,000 people, making it the fastest-growing metropolitan area in Canada and the U.S.

Then came 2025. Population growth didn’t just slow. It essentially stopped. The Toronto region actually lost about 1,000 people and dropped to 412th out of 435 North American metropolitan areas for population growth. More than 77,000 people moved to other parts of Canada, while the sharp reduction in non-permanent residents also took a bite out of population growth. That’s quite a turn. Housing costs were clearly part of the story. Calgary and Edmonton have been popular destinations for people looking for a lower cost of living and, particularly, a lower cost of housing.

Which brings us back to the strange part. Toronto housing prices have fallen significantly at the same time the conversation about Toronto being too expensive has become louder. Toronto has become more affordable. It just hasn’t necessarily felt more affordable.

Why the concern hasn’t gone away

There is a difference between being more affordable and being affordable. A house that costs $1 million instead of $1.3 million is obviously a better proposition for a buyer. But if that buyer is also dealing with higher borrowing costs and a much higher cost of everyday life, the improvement can be harder to feel.

And for people who don’t already own a home, the starting point is still daunting. Saving a down payment, qualifying for a mortgage and carrying the ongoing costs of owning a property can be a significant financial stretch, even at today’s prices.So the affordability conversation isn’t going away simply because prices have come down.But there is another question worth asking: how long does this window last?

Toronto has become more affordable partly because demand has weakened. At the same time, there is relatively little new housing coming through the pipeline, particularly the kind of housing people actually want to buy. If population growth picks up again — and Toronto remains the economic magnet it has been for decades — that combination could put upward pressure on prices. And that brings us to the bigger story, on that has not been as clear.

Toronto has two divergent stories going at once

The first story is Ontario. There are some real economic headwinds currently: slow growth, pressure on manufacturing, trade uncertainty and a large provincial debt load. Some possible exciting new ventures in minerals, but that would be years away, if it does all pan out.

Then there’s the other Toronto story. Toronto isn’t just a big city in Ontario. It is a global economic hub and the centre of one of North America’s major metropolitan regions. It has enormous concentrations of financial services, technology, life sciences, manufacturing, research and professional services. It attracts international companies, investment and talent from around the world.

In other words, Toronto has a bit of an identity crisis. Ontario has some serious economic challenges. Toronto is still an economic powerhouse. Both can be true.

Think about New York or London. They have their own economic and affordability problems, but they remain magnets for companies, capital and talent. Toronto operates on many of the same basic principles. Its economic importance extends well beyond Ontario. And that impacts real estate.

So what does it mean for housing?

I don’t think Toronto is suddenly cheap. But I also don’t think today’s prices necessarily represent a new permanent normal. The market has reset. Buyers have more breathing room, and sellers have had to adjust their expectations. That’s not necessarily a bad thing.

But with relatively little new housing on the way, an economy that continues to attract people and investment, and the potential for population growth to pick up again, there are some pretty obvious ingredients for prices to rise over time. I would expect Toronto prices to rise again. The bigger question is how quickly and when. That I can’t say.

I don’t think we need to return to the double-digit annual increases of the past for Toronto real estate to do well over the long term. A large, mature global city doesn’t need spectacular price growth to remain an important real estate market. For now, Toronto is cheaper than it was. That gives buyers a little more room. But if Toronto’s economic gravity remains intact — and housing supply remains constrained — today’s prices may eventually look less like the new normal and more like an interesting window of opportunity. Toronto may have lost some of its price momentum. It hasn’t lost its economic gravity.