The Canadian housing market has significant regional disparities, with pockets of strength and weakness. However, with macroeconomic conditions expected to improve over the next year, these differences may narrow. 2026 may represent an inflection point, with underperforming markets strengthening and leading markets cooling.
Last week, The Globe and Mail spoke with TD economist Rishi Sondhi to discuss his outlook for Canada’s highly fragmented housing market.
Let’s begin the discussion with an overview of the housing landscape and regional markets.
We know that the Canadian housing market is a collection of individual ones. At the aggregate level, it’s still a soft Canadian housing market. Home sales are below their pre-pandemic levels still and benchmark or quality-adjusted prices are on the decline, even average prices are on the decline. So, I would say it’s still a soft market that continues to recover a bit but that varies, depending on where you are in the country.
The biggest source of weakness continues to be Ontario and B.C. Those are the two markets that are weighing on the headline numbers. We’re expecting price declines in Ontario and B.C. this year when measured by average home prices.
Whereas we’re expecting stronger sales growth elsewhere. I would say it’s pretty tight conditions almost everywhere else you go in the country. For example, Manitoba and Saskatchewan are very tight markets. Quebec is an extremely tight market with very robust price growth. Even across most of the Atlantic region, PEI being a bit of an exception.
One notable deviation from the last time we talked [in Sept. 2024] is that Alberta’s market is no longer the hottest market in the country. It’s normalized and become much more balanced and price growth has moderated. Edmonton is holding up much better with respect to average prices than Calgary.
You mentioned that you expect average home prices in Ontario and B.C. to fall this year. Can you provide some figures?
The greater Toronto area is displaying outsized price weakness. For example, in Toronto, average home prices in August were down 4.9 per cent year-on-year versus a 1.9 per cent drop for Ontario overall.
And we have some offsets coming through. For example, in Ottawa, prices are up 2.1 per cent year-on-year. In London and St. Thomas, we’ve got prices up 2.7 per cent year-on-year.
Looking ahead, what are your price forecasts for those markets?
We don’t forecast each individual market, but we have forecasts for Toronto, Vancouver and Calgary.
For Toronto, we’re looking at annual average home price growth of 1.5 per cent in 2026, compared to negative 3.8 per cent in 2025. In Ontario, our home price forecast is negative 3 for this year and positive 3.1 per cent in 2026.
For Vancouver, we have negative 3.9 per cent for this year and positive 3.1 per cent for next year. For Calgary, we have positive 2.5 per cent this year and positive 2.8 per cent next year.
On a provincial level will tight market conditions in Manitoba, Saskatchewan and Quebec continue? How do you see average home prices trending in these provinces?
For Quebec, our forecast is 8.3 per cent for 2025 and 5.9 per cent for 2026. For Saskatchewan, it’s 9.3 per cent for this year and 6.5 per cent for next year. And then, Manitoba, it’s 7 per cent this year, and then 5.3 per cent next year. I’d say New Brunswick is relatively lofty as well at 6.7 per cent for this year and 5.5 per cent for next year. And Nova Scotia is at 5 per cent for this year and 5.3 per cent for next year.
So, what regions have the highest and lowest growth rates in annual average home prices forecast in 2026?
Saskatchewan at 6.5 per cent and Ontario at 3.1 per cent.
Let’s expand on the weakness in Ontario. What key drivers will bring buyers back into the condo market in the Greater Toronto Area?
Lower interest rates would certainly help. Unfortunately, we don’t see the Bank of Canada cutting too much more. Our current forecast sees the overnight rate settling at 2.25 per cent, which is only 25 basis points below where we are at right now. So, we don’t think there’s going to be much in the way of interest rate relief, but if there was that would certainly be a step in the right direction.
But, there are some positives that one can point to. One is pent-up demand, that’s not just specific to condos, that’s an Ontario story. Sales levels on a per capita basis are very low, which does indicate that there is still significant pent-up demand in Ontario’s market so that’s going to probably boost demand for all structure types, including condos. And we are seeing that come through in the data after some earlier weakness. We’re seeing some recovery in the market, at least a bit of a tentative one. Sales levels are still extremely low.
The second thing is that prices have been falling for a significant amount of time in the condo space, since mid-2023. As of August of this year, condo prices were effectively at where they were before the pandemic hit. So, all those pandemic era gains have been erased. Falling prices can be a bit of a double-edged sword because in the near-term nobody wants to catch a falling knife. So, there’s that element of it. But these falling prices means affordability has improved quite significantly in the condo space so you can get some deals out there. Affordability has turned quite a bit in the condo space so that should be helpful for demand on a go-forward basis once buyer psychology improves a little bit.
Have we seen a bottom in condo prices?
No, we don’t think so. There’s still a huge amount of unsold inventory sitting on the market. It’s going to take a while to chip away at that inventory to get inventory levels more in line with what you’d normally see. That’s not going to be a quick story.
Our latest publicly produced forecast on the condo market was generated in May. In that forecast, we had prices falling through the rest of this year. We were looking at condo prices falling 15 to 20 per cent from their third quarter of 2023 peak, with about 10 percentage points of downside taking place in 2025.
And if I were to talk about how the risks have evolved since we put that paper out, we’d say the risk is for further price declines into 2026.
How are condo completions trending in your forecast?
We don’t forecast completions.
We are at roughly 19,000 GTA condo completions for the first nine months of this year versus roughly 22,000 last year, so completions are falling.
Will we have an undersupplied market in the future given that completions are trending down?
We have done that analysis in the past, but we have not updated it for some period of time, so I don’t want to speculate.
In trying to gauge the implications of declining condo completions, one would think we could enter an undersupplied market and condo prices will rise, perhaps meaningfully, in the future?
But at the same time, population growth has slowed significantly. The population backdrop has changed quite significantly so we’d have to update the analysis to tell you if there’s going to be an undersupply.
The federal government is probably going to be coming out with a new immigration plan relatively soon.
In our forecast, we do have some increase in population growth that’s expected to take place in 2027 and we do expect that to put some upward pressure on prices in that year.
We have population growth picking up a bit in 2027, very little, but each quarter we do see stronger population growth manifesting and then even stronger population growth in 2028. And then in 2029, we’re basically back to trend population growth of about 1.2 per cent.
Do you see the 2026 mortgage resets as a risk that may drive real estate values down?
No, that is not our view.
This year, resets are happening. You are capturing the five-year fixed mortgages that were taken out in 2020.
Canadian average home prices are still roughly 30 per cent above their pre-pandemic level as of August so it’s not like the market has collapsed at all.
So, we’re in an environment where it’s taking place, and the underlying economy is weak, and population growth is slowing, and average home prices in Canada are still 30 per cent above their pre-pandemic level. The lowest one is Ontario at 26 per cent above pre-pandemic.
In 2026, we expect the economy to improve a little bit, we expect the oversupply in the GTA condo market to be picked away at. Plus, the unemployment rate will be coming down. So, it should be a better backdrop next year.
Which cities in Canada look the most affordable, particularly for retirees and young professionals?
So, I’m not going to talk about cities. I’m going to talk about provinces.
In Saskatchewan and Newfoundland Labrador, affordability conditions are better than their historical norms. So, housing is still quite affordable in those markets relative to historical norms. Those are two markets where affordability isn’t super stretched. Affordability has deteriorated quite a bit in Alberta, but it’s still not super stretched relative to its historical norm.
Otherwise, you’re looking at pretty stretched affordability relative to historical norms across most jurisdictions, to a lesser extent, Manitoba and New Brunswick.
At the less affordable end of the spectrum relative to their historical norms are Ontario and Quebec, even Nova Scotia and PEI. I will say B.C. is not as bad as Ontario in terms of its affordability relative to its own history.
Affordability has improved quite a bit in the GTA condo market with prices dropping close to their pre-pandemic levels as of August. So, there’s been a significant price decline, which means that there are buying opportunities in that space.
And when you say relative to historical norms, how far back are you looking?
I am looking at the entire data set that we have, which is from 1988 through the second quarter of 2025.
What is an upcoming housing trend or risk that few people are talking about right now, but one that could come into focus in the future?
There’s a lot of talk about housing shortages in the country and the data would point you to a housing shortage manifesting, particularly from 2022 through 2024 when population growth exploded. But we have to make sure that we’re matching the supply that we’re bringing onto the market with where demand is going to be. So, if there’s a lot of purpose-built rental housing that won’t necessarily meet the needs of buyers that are looking for detached or semi-detached or townhomes or structures like that in the suburbs, for example.
History will tell you that detached housing, for example, has made up a declining share of what the country has been constructing over time.
So, I would argue that the shortages are more pronounced for some of the ground-oriented housing like semi-detached, detached or townhomes relative to multi-unit properties. We have to make sure that we’re amping up supply for those units that seem to be the most in shortage.
What key message do you want readers to take away from this Q&A?
One takeaway is that we forecast a modest improvement in housing market activity going forward, but we’re not expecting a heroic rebound or anything of the sort.
Another takeaway is that the Prime Minister has talked about boosting housing completions to 500,000 units per year. Our analysis tells us that that level of completions is not required to return overall Canadian housing affordability to its pre-pandemic level, something closer to 400,000 would do the trick according to our modeling. So, we don’t necessarily need to double to have improved affordability outcomes.
Are 400,000 units per year achievable?
It hasn’t been achievable in Canada’s history, and it would take a significant revolution in the way in which housing is delivered in Canada.
This Q&A has been edited for clarity.
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