Canadian real estate’s downturn shows no signs of reversing, according to a Big Six bank. BMO Capital Markets is warning investors that home prices haven’t moved in nearly a decade, once adjusted for inflation. Now in the middle of the largest correction since the 90s, the bank sees inflation accelerating in the coming months, eroding real prices further.
Canadian Real Estate Demand Weak As Spring Looms
Canadian real estate demand has been weak, and inventory has been unusually robust. The sales-to-new-listings ratio (SNLR)—a gauge of demand relative to supply—hit its lowest February level in at least a decade. Winter typically brings notoriously low volume, which many cite to dismiss the weakness heading into spring.
BMO acknowledges spring can impact the outlook, but it isn’t entirely convinced. “Bigger picture, the market continues its long and slow downturn, with conditions still varying by region and market segment. We await the spring market for a better indication of whether conditions will tighten up in 2026,” explains BMO Senior Economist Robert Kavcic.
Canadian Real Estate Prices Haven’t Budged 9 Years In Real Terms
Source: BMO Capital Markets; CREA.
The price of a typical home across Canada is falling almost as fast as it climbed. Seasonally adjusted values jumped 56.7% (+$299,600) between the start of the low-rate frenzy in April 2020 and the peak of $827,600 in February 2022. After the first rate hike of this cycle, prices have plunged 20.1% (-$166,500) to $661,100 in February 2026, wiping out gains since early 2021. The correction has rolled prices back to where they were five years ago.
That’s without factoring in the damage inflicted by inflation, the bank reminds us. “In inflation-adjusted terms, that decline is nearly 30%. And, in those terms, Canadian homeowners have now seen 9 years of no real price appreciation,” explains Kavcic.
While a decade of stagnation sounds like a long time, it isn’t in the context of a Canadian housing correction. For context, it took roughly 22 years for Greater Toronto real estate prices to reclaim their inflation-adjusted value after the 1990s bubble collapse.
Canadian Real Estate Prices To See More Downward Pressure
A 90s-style real estate correction may be closer than most industry experts are willing to admit. That’s the last time Canada has seen anything even close to this magnitude. Kavcic notes, “You have to go back to the bad 1990s cycle to find something similar.”
In 2021, the economist warned that the market had begun to “crest,” cautioning investors to prepare for the possibility of negative equity if they purchased at that point. After nailing that call, he warned that buying activity won’t return until 2029, as Millennials have reached their demographic peak, limiting the fuel low rates will provide.
His outlook today isn’t exactly encouraging for those hoping for a quick return. “And, with inflation poised to pick up in the months ahead, while the market still languishes, we don’t expect this downward momentum in real home prices to turn around soon…,” warns Kavcic.
Going by current inventory and potential interest rate rises, probably another 20 to 40 % fall to be expected for detached and town houses. For condos , probably much worse and there might never be any recovery.
Ever increasing fees, assessments, insurance etc are making condos a problem ,many soon will be pretty worthless.
Condos were falsely pushed up in price by a crooked industry. I sat in on a meeting once, where I clearly heard the CREA tell the local real estate board that they needed to push up our condo prices as they were lower than the national standard price. Our housing, including condos, should be lower than the national standard as we have some of the highest property taxes in Canada – it is the offset of that.
The whole real estate industry is corrupt (and I have owned a house for many years now). I almost want to say this level of corruption started in the early 2000s when there was the “flip” craze. People were buying houses, slapping a coat of paint on, putting in cheap flooring and charging 50-100k more for that.
You are correct, the prices need to drop another 20 to 40% – the hockey stick climb in prices was ridiculous.
Good news finally…
Now let’s just pray our own government or CMHC don’t do something really stupid to screw it up again. The Liberals have to accept making home transactions such a large part of the economy is not good for Canadians. That money could be redeployed in more constructive businesses.
Real estate agents need to adjust and try to help. What happened to getting rid of blind bidding? We should, it would help us adjust quicker and reduce fraud. I’ve bought and sold 3 homes and have only had one good agent(out of 6???!!!),WHY?The hidden nature of how they are paid is a problem. They make far too much for what they do and are not loyal to the clients. Again why? Agents show homes and barely know what they’re looking at because the listing agent doesn’t participate,WHY? As a seller you’re lucky if you know what’s going on.WHY?
If buying an agent can tell you there are other bids but can’t tell you how much WHY???
Let’s move out of the dark ages;open bidding will drive things higher when the good times roll but also correct things quicker.
It’s what we need now.
Thanks for the excellent site!
As long as we re elect Carney and keep Tiff in charge of the bank, everything will be fine. They’ve told us so…
More confidence in Carney that the resume light Pierre.
Retard alert.
GTA home prices even 5 years ago were extremely high. I hope the downward slide continues. Maybe the “investors” who have hoovered up so much inventory will dump their properties and prices will return to sane levels.
Finally. And there is nothing that can stop it this time. Even BlackRock will be waiting around until near bottom before they bother with mess.
@Scott Did Pierre email that quote to you to day too?
Sounds like a lap dog of pierre’s…
the analysis seems to be accurate. The other part of the puzzle is New Home built.
How will you pay the sub contractors ( Lumber..Electricians..Plummers) There will be a dramatic lost in salary since demand will be low..If we are talking about a 30% adjustment then everything else follows .. Now you really have a problem .
Billions of people around the world and over 340 million Americans know that USA real estate has some of the cheapest deals in the world – far better deals than anywhere in Canada or elsewhere
AMERICAN HOUSING IS FAMOUS FOR ONLY CATASTROPHICALLY CRASHING MORE FREQUENTLY AND SEVERELY THEN CANADIAN HOUSING
I was offered Buy one & get one free house deals nowadays. But I am still waiting to get Buy one & get 2 or 3 houses for free deals. All the greedy Real Estate investors are fried & will be fried in coming mortgage renewals. Go Canada Go.
Elbows Up, Pants Down
Possibly the reason for the interest in socialism which leaves the power in a different 1% and at the expense of the populace.. Venezuela, Cuba, and the former Soviet Union for a few examples. They sure didn’t bring happiness.
Any solutions?
Good news for those trying to become homeowners!
I’m always amazed at how often people try to conflate homes with investments.
They are not the same.
The chickens do come home to roost! But for country founded on real estate speculation, this is to be expected. Where does one start? Well our dear LAURENTIANS are happy gorging on ever rising real estate values and oligopoly profits, the last 25 years particularly the last 10 have been magnificent, for them. The destruction of affordability, the inevitable degrading of our economy, the social consequences of uncontrolled population expansion, are all coalescing, to the point our very sovereignty is threatened, turning our globalist transnationals into rabid nationalists, overnight. It’s about to get really interesting dangerous and frightening. So very predictable foreseeable and totally unnecessary. And yet this very day we stoke the fire, a little more, with new HST exemptions. No lessons learned here.
This is in response to Ian’s comment regarding venezuela, Cuba and the former Soviet Union. He claims they did not bring happiness. One thing I can say for sure is that America put embargoes and prevented trade with Venezuela and Cuba. They caused terrible economic conditions in these countries because they simply did not like their leadership. So tell me Ian how can you blame socialism for failing in these countries when they had an adversarial Nation much more powerful than them, keeping them down?
Ok Gregor, then name 2, 1 even Socialist/ Communist countries in history that rated high in the happiness scale and benefitted the populace instead of the oligarchs…