Canada’s housing market is showing signs of softening, especially in its most expensive cities, but for many buyers, affordability is still out of reach.
New data and expert analysis suggest that even with slight price declines, the market remains difficult to enter, particularly for first-time buyers.
Prices Are Dropping – But Only Slightly
Recent forecasts from TD Economics show that:
- National home prices are expected to fall 0.3% in 2026
- Home sales are projected to decline 1.8% year-over-year
Ontario and British Columbia are expected to see the largest price declines.
While this marks a shift from previous expectations of growth, the correction so far has been modest.
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Affordability Still Near Record Highs
Even with prices easing, affordability remains a major issue.
According to Royal Bank of Canada:
- Housing costs still consume 52.4% of median household income
- That’s down from a peak of 63% in 2023, but still historically high
- For comparison, affordability was around 41% in 2015
This means that even after the recent slowdown, housing remains significantly less affordable than in previous years.
Income vs Prices: The Core Problem
The biggest issue isn’t just prices, it’s how far they’ve outpaced income.
Data from Statistics Canada shows:
- Real wages have increased ~20% since 1981
- Inflation-adjusted home prices have surged ~163.5% over the same period
This growing gap is a key reason why affordability has not improved meaningfully, even as prices dip.
Why First-Time Buyers Are Still Waiting
Experts say many buyers are holding off.
According to economists cited in the report:
- Buyers are waiting for prices to bottom
- Higher interest rates are still impacting monthly payments
- Many are unsure whether now is the right time to enter the market
Some experts also note that current mortgage costs remain elevated compared to pre-pandemic levels, making ownership less attractive.
A New Supply Problem May Be Emerging
Ironically, falling prices could create another issue.
As markets soften:
- Developers are cancelling or delaying projects
- New construction activity is slowing
This could lead to future supply shortages, which may push prices higher again.
Policy Changes Aren’t Solving Affordability
Governments have introduced measures like tax rebates and incentives, but experts say these have had limited impact so far.
For example:
- Ontario’s temporary HST rebate aims to reduce upfront costs
- Federal immigration changes may reduce demand
However, these measures have not significantly improved affordability in the short term.
Renting May Be the Better Option – For Now
Some experts suggest that renting currently offers better value than buying.
With:
- High mortgage costs
- Uncertain price direction
- Lower short-term demand
Renting may be the more financially stable option for many Canadians in 2026.
What This Signals
Canada’s housing market is shifting, but not in a way that meaningfully improves affordability.
Key takeaways:
- Prices are falling slightly, but not enough
- Housing costs remain historically high relative to income
- First-time buyers are still largely priced out
- Supply constraints could return if construction slows
For many Canadians, the reality is clear:
👉 Even with a cooling market, homeownership is still out of reach for a large portion of buyers.
Thinking about buying?
👉 Find out what you qualify for here
References
House prices dropping in Canada’s most expensive cities, but still out of reach for many | CBC News
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