Key Takeaways:
- National home sales in Canada declined by 1.9 per cent in December compared to the same period a year earlier.
- Some Canadian markets, such as St. John’s, Regina, and Quebec City, saw a boost in activity and prices, with Quebec City experiencing a 17 per cent price increase year-over-year.
- The housing market in regions like southern Ontario and parts of B.C. has cooled, with an influx of new listings putting downward pressure on home prices.
- Economic fears and uncertainty, including the U.S. trade war, may continue to influence the housing market and make a significant rebound unlikely in the near future.
- The direction of the Canadian economy, including the labour market and interest rates, will play a crucial role in determining the trajectory of the housing market.
Introduction to the Canadian Housing Market
The Canadian housing market has experienced a decline in national home sales, with a 1.9 per cent decrease in December compared to the same period a year earlier. According to a report published by the Canadian Real Estate Association (CREA), this decline marks a year that saw lower interest rates but heightened economic anxiety. Despite this, some markets have seen a boost in activity and prices, with cities like St. John’s, Regina, and Quebec City experiencing significant growth. The latter city saw a remarkable 17 per cent price increase year-over-year, driven in part by the Bank of Canada’s decision to lower its key interest rate by a full percentage point in 2025.
Regional Variations in the Housing Market
The housing market in Canada is characterized by regional variations, with some areas experiencing a slowdown in activity and prices, while others remain stable or even hot. In southern Ontario and parts of B.C., the market has cooled, with an influx of new listings putting downward pressure on home prices. For example, home sales in the Greater Toronto Area (GTA) declined by 11.2 per cent in 2025 compared to 2024, according to a report from the Toronto Regional Real Estate Board. In contrast, regions like Quebec, the Atlantic provinces, and the Prairies have seen stable or even hot activity. As Robert Hogue, assistant chief economist at RBC, notes, "There’s a lot more inventory in those markets. So there’s less urgency for buyers to move quickly."
Economic Fears and Uncertainty
Economic fears and uncertainty, including the U.S. trade war, may continue to influence the housing market and make a significant rebound unlikely in the near future. The U.S. trade war has had a significant impact on the Canadian economy, with many industries experiencing uncertainty and volatility. As John Pasalis, president and broker at Realosophy Realty, notes, "Economic fear and uncertainty wrought by the U.S. trade war could continue to influence the housing market, making a significant rebound unlikely any time soon." Furthermore, the upcoming renegotiations on the CUSMA trade pact may also contribute to continued uncertainty and volatility in the market.
Impact of Interest Rates and Labour Market
The direction of the Canadian economy, including the labour market and interest rates, will play a crucial role in determining the trajectory of the housing market. If the labour market picks up, demand could firm up and put a floor on prices; however, if the economy proves to be weaker than expected, prices might fall more. The Bank of Canada has maintained its outlook could change, especially with trade uncertainty heightened by upcoming renegotiations on the CUSMA trade pact. As Hogue notes, "We are quite likely to be concerned about the direction of the market throughout a good part of the year, because of all this economic uncertainty lingering and continued questions about the labour market and how rapidly it will improve."
Conclusion and Future Outlook
In conclusion, the Canadian housing market is characterized by regional variations, with some areas experiencing a slowdown in activity and prices, while others remain stable or even hot. Economic fears and uncertainty, including the U.S. trade war, may continue to influence the housing market and make a significant rebound unlikely in the near future. The direction of the Canadian economy, including the labour market and interest rates, will play a crucial role in determining the trajectory of the housing market. As Shaun Cathcart, CREA senior economist, notes, "It would be prudent for market observers to resist the temptation to trace a line from the end of 2025 into 2026." Instead, it is essential to closely monitor the market and economic trends to better understand the future outlook for the Canadian housing market.
