The future of Canada's housing market is a topic that has many Canadians on the edge of their seats. With a 1.9% decline in national home sales in December compared to the previous year, as reported by the Canadian Real Estate Association, the market's trajectory is a subject of much speculation.
But here's where it gets controversial: while some markets, like Toronto and Vancouver, experienced a significant slowdown, with sales hitting a 20-year low, other regions thrived. Cities such as St. John's, Regina, and Quebec City saw a boost in activity and prices, with Quebec City's home prices increasing by a staggering 17% year-over-year. This disparity can be attributed to the Bank of Canada's decision to lower its key interest rate by a full percentage point in 2025, providing a much-needed stimulus to certain markets.
CREA's senior economist, Shaun Cathcart, cautions against drawing a straight line from 2025 into 2026, predicting a resurgence in sales as we approach spring. However, experts interviewed by CBC News express concerns about the affordability of homes, with prices remaining out of reach for many prospective buyers. The uncertainty surrounding U.S. relations is also expected to keep some first-time buyers on the sidelines for the foreseeable future.
Toronto's housing market, in particular, is a story of contrasts. While it may be turning the page on a sluggish year, 2026 is showing more signs of the same, according to John Pasalis, president and broker at Realosophy Realty. The economic fear and uncertainty caused by the U.S. trade war are expected to continue influencing the market, making a significant rebound unlikely in the short term.
The broader housing markets in southern Ontario and parts of British Columbia have also cooled, with an influx of new listings putting downward pressure on home prices. Hamilton, for instance, saw its slowest home sales in December since 2010, with a 12% year-over-year drop. Robert Hogue, assistant chief economist at RBC, attributes this to the increased inventory in these markets, reducing the urgency for buyers to act swiftly.
However, not all regions are experiencing a slowdown. Parts of Quebec, the Atlantic provinces, and the Prairies have seen stable, if not hot, activity. Hogue cautions that the current market conditions in regions where activity has slowed should be viewed in the context of the post-COVID-19 surge in home prices, which saw smaller cities in southern Ontario experience tremendous growth. As a result, the correction in these areas is more significant due to the substantial price gains during the pandemic.
The direction of the Canadian economy will play a crucial role in shaping the housing market's future. If the labor market improves, demand could increase, stabilizing prices. Conversely, if the economy weakens further, prices may fall even more. While analysts don't expect the Bank of Canada to move interest rates anytime soon, the central bank has maintained that its outlook could change, especially with trade uncertainty heightened by upcoming renegotiations on the CUSMA trade pact.
So, where does this leave us? The housing market's future remains uncertain, and Canadians will likely remain concerned about its direction throughout much of the year due to lingering economic uncertainty and questions about the labor market's recovery.
What are your thoughts on the state of Canada's housing market? Do you agree with the experts' predictions, or do you have a different perspective? Feel free to share your insights and opinions in the comments below!
