The Toronto housing market is gearing up for another intense year in 2025. With home prices expected to rise and mortgage rates slowly easing, many Torontonians might wonder if it’s the right time to pursue homeownership.

According to a recent Royal LePage report, the aggregate home price in the Greater Toronto Area is projected to climb 5% year-over-year in 2025, reaching $1,225,770 by the end of the year. This figure is over 40% higher than the national average, which is forecasted to hit $856,692.

For single-family detached houses, Toronto's median price is expected to soar to $1,523,466, a significant 7% increase. Meanwhile, the median condo price could see a slight dip, settling at $714,285. The report predicts that tighter housing supply and renewed buyer interest will push prices higher, especially for detached homes.

Royal LePage CEO Phil Soper explains, “Buyers now believe home prices have hit bottom and are eager to act before competition intensifies.” With falling interest rates and favorable lending rules creating increased demand, prospective buyers are entering the market in droves.

However, Toronto's cost of living, especially for homeowners, remains among the highest in Canada. So, how much do you need to earn to afford a home in Toronto in 2025? Let’s break it down.

Financial Breakdown: Buying a Detached Home in Toronto

The median price of a single-family detached home in Toronto is forecasted to reach $1,523,466 in 2025. Here's what that means for your finances:

• Down Payment: A minimum 20% down payment ($304,693.20) is required for homes over $1.5 million.
• Mortgage: With a 6.45% interest rate over 25 years, your mortgage of $1,218,772.80 results in monthly payments of $8,126.73, or $97,520.76 annually.
• Additional Costs: Property taxes (around $10,897.18 annually) and heating costs ($2,662.68) bring total housing expenses to approximately $111,080.62 per year.

To comfortably afford these costs without exceeding 32% of your gross income, your household would need to earn roughly $347,127 per year.

Financial Breakdown: Buying a Condo in Toronto

If a condo fits your budget better, here’s what the median price of $714,285 looks like:

• Down Payment: The minimum down payment is 5% on the first $500,000 and 10% on the remaining amount, totaling $46,428.50.
• Mortgage: Factoring in a 4% CMHC insurance premium for a smaller down payment, the total mortgage comes to $694,570.76. At a 6.45% interest rate, this equates to monthly payments of $4,631.37, or $55,576.44 annually.
• Additional Costs: Estimated condo fees (about $7,650 annually) and property taxes ($5,109.20) bring total yearly expenses to $68,335.64.

To manage this, your household income should be approximately $213,549 per year.

What This Means for Buyers

With Toronto’s housing market as competitive as ever, earning six figures or having significant savings is essential for many would-be homeowners. However, there’s some positive news on the horizon:

• Falling Interest Rates: Gradual reductions in interest rates could lower monthly payments and make mortgages more affordable.
• New Mortgage Policies: First-time buyers and those purchasing new builds now qualify for 30-year amortizations on insured mortgages. Additionally, the insured mortgage cap has increased to $1.5 million, allowing buyers to access higher-priced homes with lower down payments and smaller monthly obligations.

Is 2025 the Year to Buy?

If you’ve been waiting for the right moment, the renewed competition in Toronto’s real estate market suggests that time might be now. With fewer new listings and more buyers re-entering the market, prices are likely to continue rising. Taking advantage of new policies and favourable conditions could help you make the leap into homeownership.

Remember, preparation is key. Start by assessing your finances, saving for a down payment, and consulting with a trusted real estate professional to explore your options. The Toronto housing market isn’t easy to navigate, but with the right approach, you could find yourself unlocking the door to your new home in 2025.

Conclusion

Toronto’s housing market continues to challenge prospective buyers with its high prices and intense competition. However, falling interest rates and updated mortgage policies provide glimmers of hope. Whether you're aiming for a detached home or a condo, understanding your financial situation and planning accordingly is crucial. By staying informed and prepared, you can turn the dream of homeownership into a reality this year.