Heading into 2026, the real estate market looks less fragile than headlines suggest. Conditions are forming that historically mark the end of a correction. Typically, widespread recognition will only come after momentum has already turned and by then the buying opportunity will have passed.
Home values across several key Toronto neighbourhoods have already adjusted meaningfully since their 2022 peak. Around 20 to 23%. That pullback has brought valuations into more sustainable territory. It may seem irrelevant but globally home prices are stable in most areas, and up in Europe, while Canada has seen a deeper correction. Usually when a pendulum swings too far in one direction, it will inevitably swing as widely in the other.
December transactions were lower than November, but this is traditionally the case. Yet despite fewer sales, prices have remained largely steady suggesting an equilibrium. Sellers are no longer under duress and buyers remain selective, rather than absent.
One thing is clear: new home construction is in the dumps and development has slowed to a trickle. The sharp slowdown in construction during 2025 is expected to translate into tighter inventory in the years ahead. When buyers re-enter the market — whether driven by population growth, immigration, or improving affordability – limited supply could quickly restore competition.
The economics of new housing also provide a strong floor under prices. Like cars, groceries, and nearly everything else, building costs aren’t getting any lower. Expecting markedly cheaper new homes when lumber, drywall, skilled labour, land acquisition, and regulatory fees are through the roof is a pipe dream. New construction will continue to anchor values rather than undercut them. With construction slowing dramatically, when buyer demand rebounds, the result will be familiar. Tighter supply, increased competition, and renewed upward pressure on prices. From that perspective, 2026 may represent a closing window of opportunity.
Political talk of dramatically lower prices by flooding the market with millions of new units is just that, talk. A few thousand homes maybe. Fortunately, policymakers tend to adapt when pain comes to middle class voters. Signs of that shift are already emerging. The PM’s already dropped the Underused Housing Tax (cottages, chalets etc.), restoring the dream of owning a home for all seasons. The ban on foreign buyers is headed for the chopping block as well. The current ban’s been extended to 2026, but housing minister Gregor Robertson’s is already dropping hints.
Australia’s got an idea: let’s allow foreign cash inflows into new construction but not into the resale real estate market. Foreigners support our new home builders without driving resale prices sky high. They have that right down under, the new mullet craze, not so much.
Taken together, Toronto’s 2026 real estate landscape looks less like a market in decline and more like one finally on a solid foundation. Prices have already adjusted, supply’s tightening quietly, and policy’s evolving. I say conditions for renewed confidence are forming and, as they often do, long before the broader public notices.
People who act when the time is right may remember 2026 as a year when the real estate market surreptitiously prepared for its next upswing. Don’t wait for FOMO to kick in.