Tariffs and trade are continuing to cloud the outlook, but some green shoots have emerged
Canada’s housing market is displaying tentative signs of improvement after months of declining sales and prices, though economic uncertainty continues to cast a shadow over the sector’s prospects, according to TD economist Rishi Sondhi.
In a new analysis, Sondhi points to encouraging monthly gains that began in spring. Home sales rose 4% in May following modest increases in April, with June delivering another 3% monthly gain. However, these improvements follow a challenging period that saw national home sales drop 4.8% in March compared to February, according to the Canadian Real Estate Association (CREA).
Trade tensions dampen consumer confidence
The economist also highlighted how US-Canada trade tensions are significantly affecting housing demand. Exports to the United States have fallen 14% as of May compared to the previous year due to tariffs. This economic pressure has made consumers hesitant about major purchases like homes as they worry about job security and business revenues.
“US-Canada trade tensions and job markets are significant factors that can affect housing demand and prices,” Sondhi noted. “So, even if housing sales levels improve, they are likely to remain subdued compared to peak pandemic levels due to market uncertainty, particularly in BC and Ontario.”
Regional variations expected
The housing market’s recovery will not be uniform across Canada. Sondhi expects the strongest quarterly price growth in the Prairies, where tighter market conditions favour sellers. Meanwhile, Ontario and British Columbia markets are likely to remain soft due to oversupply conditions.
“In Ontario and BC, there’s too little demand chasing too much supply. And when buyers have lots of choice, you tend to see prices get negotiated down,” he said.
Greater Toronto Area condo prices face particular challenges, with TD Economics forecasting they will drop 15–20% from their 2023 peak by year’s end.
Rate cuts offer hope
The Bank of Canada has implemented two rate cuts of 25 basis points each in 2025, with TD Economics predicting additional cuts due to labour market softness. These reductions could provide modest stimulus, particularly for variable-rate mortgage holders.
2026 outlook
Sondhi anticipates stronger growth in home sales and prices in 2026, supported by an improving economy and reduced uncertainty. However, he warns that poor affordability in key markets like British Columbia and Ontario will likely restrain any significant price rebounds.
The GTA condo market may benefit from improved affordability as declining prices since late 2023 could help stimulate sales activity in 2026.
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