Key Takeaways
- Canada’s housing market ended 2025 with a decline in home resales and prices, due to affordability challenges, economic uncertainty, and job market slack.
- The decline in home resales and prices was more pronounced in Ontario and British Columbia, while other regions such as Quebec, Saskatchewan, and Manitoba showed resilience.
- The MLS Home Price Index (HPI) fell 0.3% nationwide, with Toronto and Vancouver experiencing declines of 6.3% and 4.5% year-over-year, respectively.
- Regional divergences in the housing market are expected to persist into 2026, with a broader market recovery depending on the pace of confidence rebuilding.
- Improving labor market conditions and a return to normalcy in consumer sentiment could support a turnaround in the housing market.
Introduction to Canada’s Housing Market
Canada’s housing market closed out 2025 without much fanfare, as home resales and prices declined in December. This decline underscores the several headwinds that have been constraining a meaningful recovery, including persistent affordability challenges, economic uncertainty, and job market slack. The softness in the market is a result of the various factors that have been affecting the economy, including the trade war, which derailed a recovery supported by material interest rate cuts from the Bank of Canada.
Regional Divergences in the Housing Market
The decline in home resales and prices was not uniform across the country, with some regions experiencing more pronounced declines than others. Resales in Toronto fell 0.4%, while Montreal, Vancouver, Calgary, Edmonton, and Ottawa all posted more pronounced declines of 2.5% to 5.7%. The wide range reflects the divergent regional dynamics that have come to define Canada’s housing landscape. Price weakness remains concentrated in Ontario and British Columbia, where affordability pressures are most acute, and inventory is elevated. Buyers have shifted decisively to a position of strength, with ample choice allowing them to be selective.
Price Weakness in Ontario and British Columbia
The MLS HPI in Toronto fell further in December, continuing a downward trajectory that has delivered a 6.3% decline over the past year. Southern Ontario fared similarly, with Kitchener-Waterloo down 8.6%, London 8.3% lower, and Hamilton down 7.4% year-over-year. In British Columbia, Vancouver recorded a 4.5% monthly decline in transactions, with the MLS HPI falling 4.5% annually, while the Fraser Valley dropped 6.2% over the same period. These declines, while substantial, remain insufficient to fully reverse the massive pandemic-era surge of more than 50%, leaving affordability strained for prospective buyers.
Resilient Markets
Not all regions in Canada are experiencing declining home prices and sales. The MLS HPI posted year-over-year gains between 5.9% and 17% across major markets in Quebec, with monthly advances recorded in December. Quebec City continues to outpace the nation, with its MLS HPI surging 17% annually and advancing a robust 3.2% from November. Home values in Saskatchewan and Manitoba remain similarly well supported, with the MLS HPI up between 6.2% and 6.9% year-over-year. The Atlantic region’s price trends also predominantly show an upward tilt.
Challenges and Future Outlook
2025 proved challenging for Canada’s housing market, with resale transactions falling 1.9% compared to 2024. The trade war derailed a recovery supported by material interest rate cuts from the Bank of Canada. Regional divergences were the real story, with weakness concentrated in Ontario and British Columbia, while other parts of the country held up relatively better. A broader market recovery will hinge on the pace of confidence rebuilding, a process likely to be gradual given modest projected economic growth and muted population gains ahead. Past interest rate cuts will provide some support, but limited additional stimulus from monetary policy is expected. Nonetheless, improving labor market conditions and a return to normalcy in consumer sentiment could gradually draw buyers from the sidelines and support a turnaround.
Conclusion and Future Prospects
In conclusion, Canada’s housing market ended 2025 on a soft note, with declining home resales and prices. The decline was more pronounced in Ontario and British Columbia, while other regions showed resilience. The future outlook for the housing market is uncertain, with regional divergences expected to persist into 2026. A broader market recovery will depend on the pace of confidence rebuilding, with improving labor market conditions and a return to normalcy in consumer sentiment potentially supporting a turnaround. As the Assistant Chief Economist, Robert Hogue, notes, the housing market will continue to face challenges, but there are also opportunities for growth and recovery in the coming year.