The issues of housing affordability, ongoing economic uncertainty, and continued trade tensions with the U.S. mean that the Canadian real estate market is unlikely to see a sharp revival in 2026. However, experts believe that market participants have reasons for cautious optimism.
The Bank of Canada ended 2025 by keeping the key interest rate unchanged on December 10, and in the coming months, it does not signal a readiness for a sharp reduction. At first glance, this may seem like bad news for potential buyers who have already been pushed out of the market due to high housing costs. However, for those who have been postponing their purchase in anticipation of even lower rates, the current stability may serve as an incentive to act.
Doug Porter, Chief Economist at the Bank of Montreal (BMO), believes that stable and relatively low rates can play a positive role. According to him, a degree of certainty, even if not absolute, can support the market and bring back some buyers who have been waiting on the sidelines.
Significant Rate Reductions Have Already Occurred
Since mid-2024, the key rate of the Bank of Canada, which affects floating mortgage rates and home equity lines of credit, has decreased by more than half—from 5% in June 2024 to 2.25% by the end of 2025. This is one of the fastest and most extensive cycles of monetary policy easing in recent decades.
Porter believes this has already improved prospects for buyers. However, the decisive factor remains the trade conflict between Canada and the U.S., which has been ongoing since Donald Trump took office in January. The expert emphasizes that the housing market needs clarity in trade relations; otherwise, uncertainty will dampen activity.
Overall, the economist expects the market to “thaw a bit” in 2026 but not become truly hot. Growth, in his estimation, will be moderate.
Sharp Regional Differences
The prospects for the real estate market in Canada still heavily depend on the region. There is no single “national” market—and this gap is particularly noticeable now. In 2025, Ontario and British Columbia, which saw a surge in demand during the pandemic, faced sluggish sales and a crisis in the condominium market. At the same time, the Atlantic provinces and Quebec showed more resilient results.
Porter notes that southern Ontario remains under significant pressure due to high housing costs and affordability issues. Moreover, Ontario is more dependent on trade with the U.S. than other regions, making it particularly vulnerable amid trade uncertainty.
Rate Increases Unlikely
While housing affordability will continue to vary significantly from region to region, there is good news on the interest rate front: the Bank of Canada has seemingly completed its cycle of rate cuts, but it is not yet ready to raise them.
Unlike other countries, such as Australia, where discussions about possible tightening of monetary policy are underway, Canada is in a different situation. The country’s economy is much more dependent on trade with the U.S., and uncertainty surrounding the renegotiation of the USMCA, scheduled for 2026, continues to exert pressure.
Until this “dark cloud” dissipates, discussions about rate increases in Canada seem premature, economists believe.
