What’s next for the Canadian housing market, according to our reporters

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On April 16, real estate reporters Carolyn Ireland and Shane Dingman and personal finance reporters Erica Alini and Salmaan Farooqui answered reader questions on the state of the real estate market in Canada.

Tariffs, world events and other economic uncertainties have Canadians reluctant to make the move on buying or selling a home, and investors have largely pulled out of the preconstruction condo market, causing demand and prices to plummet.

Readers asked if it was a good time to buy or sell a house, whether fixed or variable mortgages were the way to go, and what’s happening with condos. Here are some highlights from the Q&A.

What the near future holds for the housing market

Why are buyers so reluctant to enter the market? Prices seem to be going down.

Carolyn Ireland: The decline in prices is attracting some buyers who have been waiting on the sidelines. But the drop also deters house hunters who are hesitant to “catch a falling knife.” That’s the paradox of a downward trend: The more prices slide, the more buyers wait for them to fall farther. Add to that economic uncertainty, volatile financial markets and the actions of our neighbour down south, and many buyers adopt a “wait and see” psychology.

How is the situation in the Middle East impacting the housing market in Canada?

Erica Alini: The war has driven up oil prices and created fresh worries about a resurgence of inflation. This has driven up bond yields, along with rates for new fixed-rate mortgages. It has also virtually wiped away any chances of a Bank of Canada rate cut in the short term, which would have lowered borrowing costs for people with variable mortgage rates.

All in all, the impact on interest rates is a cold shower for an already frosty spring housing market.

Then there’s the broader impact on the economy. For businesses, the war in Iran is another source of uncertainty. When companies aren’t sure what the future holds, they invest and hire less. And the labour market in Canada was already tough.

This matters for the housing market because people are rarely in the mood to buy a house when they’re concerned about their job security.

War in the Middle East could result in mortgage rate hikes. Here’s how to prepare for it

Ireland: I would add that buyers in all price segments are rattled when they see turbulence in their stock and bond portfolios. For a first-time buyer, their down payment may have taken a hit. In the upper echelons, many financially savvy people will hesitate to trade up.

For the Greater Toronto Area market, is this the bottom, or will the market go lower later in the next year or so? Should we wait or jump right in?

Salmaan Farooqui: It would be pretty bold to declare that the GTA market has hit the bottom. We’re at a very uncertain time for the economy right now, so it’s hard to know. The Canadian Real Estate Association downgraded its outlook on how many transactions and how much prices will increase across Canada this year. The CREA also said it’ll have to downgrade its forecast if the war in Iran continues to drag on.

But I can echo some advice I’ve heard from many realtors: jumping into the market should mostly be based on whether it makes financial sense for you, rather than just trying to time the bottom.

Do you want to commit to home ownership for the long run, or would you prefer to take advantage of relatively cheap rental rates right now? Can you afford the down payment and mortgage payments on the kind of home you want, or would you be really stretching yourself thin? Could you foresee yourself moving to a different community in the near future?

Those are the kind of questions I would consider, beyond just trying to time the bottom of the market.

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Are we seeing signs of forced selling or financial stress among investors that could create buying opportunities?

Shane Dingman: There are a lot of signs of this if you know where to look: for more than a year in what’s known as the assignment market there have been people trying to flip contracts for a pre-construction condominium apartments to someone else, often with few takers at face value. There are those who will actually go so far as to offer money to buyers to take those contracts away and keep them from having to purchase the soon-to-be-completed homes.

There has also been signs that developers are willing to consider steep discounts to move unsold units. We got data that the amount of unsold but completed condos in the Toronto region has hit a new high of about 4,200 empty apartments and we have written about “bulk buyers” snapping up dozens of apartments at once. Even mortgage brokers tell me they have clients trying to sell assets to afford things they need to buy next.

Cities like Saskatoon, Montreal and Quebec City haven’t seen the same drop in prices as other major centres in Canada. Why are they outliers and do you think that trend will continue through 2026?

Farooqui: There are a couple different factors going on in Quebec and in the Prairies.

In the Prairies, the market is being propped up by strong inter-provincial migration numbers. Lots of people are moving to the Prairies in search of a more affordable home, and that is driving up prices as a result. Prices are also very low in the Prairies, so there’s a lot more room for them to increase.

A similar thing is playing out in Quebec, but there’s another unique circumstance playing out there. Montreal and Quebec City have always had a strong culture of renters, but rent prices have been increasing dramatically for the first time in a long time there.

As a result, it’s driving many more households to consider ownership for the first time, and the inventory is at historic lows as a result. That’s why Quebec City was Canada’s hottest real estate market in 2025.

There’s clearly lots of affordable housing, just not in places most Canadians would consider to be desirable. Shouldn’t we be solving the desirability problem instead of obsessing about the affordability of desirable homes in unaffordable jurisdictions?

Dingman: Unaffordable real estate is a big problem in our largest cities, and not least because cities are often major engines of our economy and often play vital roles in our society. We should pay attention to whether the people we need to keep them running – from nurses or teachers to police and sanitation workers – can afford to live there. A big part of what has made these cities unaffordable has been zoning rules and building costs that restrict what kind of homes can be built in large chunks of our urban areas, and there’s been movement on those fronts that may someday result in more affordable desirable places.

But the “less desirable” places are also interesting, because there are important differences between the types of jobs and pay available from region to region, and things as important as access to health care that changes from rural to urban and big province to smaller province. There’s also cost changes, higher or lower taxes, higher or lower fuel costs, etc. Anyway, the question of how to make one community more desirable may be a question less about real estate and more about how we organize our entire society.

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Is the new HST rules in Ontario just an effort to get investors back into the market? What impacts have you seen from their departure?

Alini: The main goal of the rebate seems to be to get buyers – both end users and investors – back into the market to reduce the backlog of unsold new condo units and get developers building again.

When investors fled, the condo market cratered. Builders have had a particularly hard time selling the kind of tiny units that were popular with investors but not so much with people looking for a home to live in.

Since then many developers have been trying to build larger units in buildings that do a better job of catering to the needs of end users. And regulators seem wary of going back to the investor-driven speculation of the heydays of the condo market.

The HST rebate is available for investors, too, but only those who will buy a new home for the purposes of turning it into a residential rental property (instead of, say, trying to turn a profit by flipping it).

State of mortgage rates

Are interest rates going to stay the same in the foreseeable future?

Alini: Economists and investors generally expect the Bank of Canada to remain on stand-by for the next little while. That said, the central bank right now is having to weigh the risk that the economy will weaken further against the chances that a prolonged conflict in the Middle East will continue to fuel inflation. Surprises are possible in both directions.

In the longer term, some economists expect rates to rise in 2027. But even the big banks don’t agree on whether and when that might happen and how fare rates could go.

Forecasting rates is always difficult, and nothing is ever set or certain. But the bottom line here is that right now there’s an unusual degree of uncertainty clouding the rate outlook.

The mortgage renewal wave didn’t destroy finances. But how badly are they hurting?

Is it a better time to get a variable or fixed mortgage?

Farooqui: Deciding between a variable and fixed mortgage should really come down to your risk tolerance.

Yes, variable rate mortgages are significantly cheaper than fixed mortgages right now. But we’re also in unpredictable times, and the expectations around how many times the Bank of Canada will hike rates have changed fast. Expectations also swing wildly every time U.S. President Donald Trump does something unexpected, like warring in the Middle East or imposing tariffs on much of the world. Many economists also believe that interest rates will only go up, rather than down, in the near future, regardless of the ongoing war in the Middle East.

Would you lose sleep worrying about how some of these world events will impact your mortgage? If so, maybe variable rates aren’t for you.

Otherwise, variable could be a good option for you if you’re open to taking on the risk for potential reward.

Tips for prospective homebuyers and sellers

In general, how should buyers think about timing the market versus securing a good long-term asset in today’s conditions?

Alini: Timing the market is quite tricky, whether you’re investing in stocks and bonds or buying a house.

One of the advantages of buying a home in a slow market is that you won’t face as much competition. You’ll have more time to decide and, possibly, enough bargaining power to impose conditions on the seller or even negotiate a lower price.

If you’re looking for a home to live in for many years and find something that suits your needs at a budget you can afford, it probably won’t matter much in the long run that prices dipped a little further after you bought.

That said, you can hedge a bit against bad timing when it comes to mortgage rates. Fixed mortgage rates have gone up recently but may come down once the conflict in the Middle East is resolved. If you’re inclined to go fixed and believe rates will come down, it’s worth considering a shorter-term compared to the classic five-year term.

And if you’re house shopping right now, make sure to get pre-approved. With a mortgage pre-approval, lenders typically guarantee a mortgage rate for up to 120 days, which protects you from the risk that rates will raise while you’re house hunting.

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We’re looking to downsize and sell our home. What are the most important questions we should be asking prospective agents to decide which to sign with?

Ireland: I would recommend interviewing three or four agents. Look for the veterans in your neighbourhood because they are usually the ones who will be spot on when it comes to setting an asking price. It’s good to ask for lots of supporting data from them. Good agents will show you the most recent sales for comparable properties in your area. Also, ask them to show you the results of their own recent listings. What is their plan for staging and marketing?

The more frank they are, the more realistic they are likely to be. Some sellers end up regretting choosing the agent who suggests the highest asking price because that agent may be using flattery to snag a new listing!

I’m interested in selling my old condo and moving into a new one. Is now a good time to get into a new preconstruction condo, and how has the market been for sellers of older properties?

Dingman: There’s no easy answer to your question but there are a number of factors to consider. Depending on the age of the condo apartment, it could be larger than what has been released to the market more recently. Also depending on the management of your current condo, you may have cost certainty on maintenance fees (that’s not always good, some people know they are facing an expensive special assessment on a major repair if it’s a 20-year-plus type building) but brand-new buildings often have underfunded reserve funds and unrealistically low fees given some of the amenities that have been added to newer builds.

As we mentioned, there’s a huge volume of unsold condos that have never been lived in. If you’re careful and tough you might find a deal there.