07:44 AM EDT, 05/02/2025 (MT Newswires) -- 2024 was another soft year for the Greater Toronto Area (GTA) resale condo market, and this trend was maintained in Q1 of this year, said TD.

By the end of this year, condo prices will likely have dropped between 15%-20% from their Q3 2023 peak, with about 10 ppts of this decline taking place this year, wrote the bank in a note to clients. Soft population growth, elevated supply and economic uncertainty should all weigh.

While 2025 is shaping up to be a poor one for GTA condos, 2026 could see some modestly improved fortunes, stated TD. For one, the interest rate backdrop should be supportive and there is likely pent-up demand.

The Bank of Canada will probably cut its policy rate by an additional 50bsps this year, bringing it to 2.25%, and hold it at that level through next year, it pointed out. It's also worth noting that no major central bank has cut rates as aggressively as the BoC since last year, offering significant rate relief to buyers.

Meanwhile, after moving higher recently due to United States tariff-driven inflation concerns, the bank expects bond yields to pull back a touch by year-end and in 2026. Tariff-related uncertainty should also wane into next year, giving some support to buyer confidence.

TD is also expecting improved economic activity and hiring as uncertainty lessens. On the supply side, the impact on completions of the pullback in condo construction observed since the second half of 2024 should be more apparent next year.

Indeed, the bank estimates condo completions to fall to levels below recent averages, in turn reducing supply pressures faced in the market.

Notably, boosting housing supply is a priority for the newly elected federal Liberal government, added TD. The Liberals are pledging to eliminate the GST for first-time homebuyers who purchase homes under $1 million.

This policy could support demand and, ultimately, supply. However, lags inherent in the homebuilding process suggest that the bulk of this impact on condo construction could happen after 2026. The Liberals are also promising to support construction through a new entity called "Build Canada Homes", although much of the focus appears to be on affordable housing and purpose-built rental units.

Liberals are also pledging to reduce development charges by 50%. As these charges are relatively high in the GTA, this could offer some upside risk to supply next year if implemented in a timely manner.

Although the GTA condo market should enjoy a firmer year in 2026, chances of a heroic rebound appear "slim," according to TD. For one, the anticipated turnaround in hiring and economic activity will probably be gradual and moderate, reflecting scaring on the psyche of households and businesses from the trade war with the U.S.

What's more, population growth is likely to remain subdued next year as well, restraining rent growth and the overall attractiveness of condos as investment assets, noted the bank. In this vein, investor demand could take a backseat to other types of buyers -- a dynamic that could hold in 2025 as well -- particularly first-time homebuyers, who typically tend to buy condos as their first purchase in the GTA.

Finally, condo affordability is likely to remain strained next year, weighing on the scale of any potential bounce back in sales and prices.