In 2026, the Canadian housing market is recalibrating after a slower 2025. High costs of living are driving buyers toward smaller down payments under the new $1.5M insured mortgage rules, while the “condo correction” and an aging population’s need to downsize will shake up demand for inventory. Our expert analyzes how these factors, plus a massive generational wealth transfer, are creating a new landscape for buyers, sellers, and investors.

More Downsizers and Generational Wealth Transfer

Canada is on the cusp of becoming a super-aged nation. One in five Canadians will be 65 or older in 2026, a shift that will reshape both how seniors live and how wealth moves through the housing market. “As accessibility moves from a niche requirement to a more of an essential standard, we expect bungalows, large apartments, and multigenerational suites to become the market’s highest-value commodities.” explains Brittany Kostov, Industry Relations Officer at Zoocasa.

Even seniors who are not ready to sell are starting to talk about moving to smaller homes, looking at places they could move to, meeting with real estate agents to find out how much their home could sell for, and thinking about fixing up their homes to make them easier to live in as they get older and to increase their value if they sell.

It’s also the kind of move that takes time. “We’re seeing a shift toward ‘pre-planning.’ People are walking through saying, ‘I’m not ready yet, but I’m planning for next year. I’m planning for the downsize.’ For those entering this next stage of life, it’s a slower, more deliberate process, but it’s one that requires starting the conversation much earlier than in previous years,” says Kostov.

According to the National Institute on Aging, six in 10 seniors have not updated their homes or made concrete plans for future housing needs, increasing the likelihood of a forced, late-life move rather than carefully planned transitions.

Furthermore, real estate has become the cornerstone of Canadian retirement. Driven by financial need, many are downsizing to unlock home equity, with the Health Care of Ontario Pension Plan reporting that 50% of working homeowners intend to use a future sale to fund their later years. In 2026, detached home prices remain elevated while condos and townhomes are comparatively more affordable and easier to find. This gives downsizing seniors a rare arbitrage opportunity: sell a high-value family home, buy a smaller one, and use their money for retirement.

The Canadian Mortgage and Housing Corporation (CMHC) survey found that on average, parents provided $74,570 in 2025 to assist their adult children with home purchases. In high-cost provinces like British Columbia, this figure jumps to $204,000, according to CIBC. Notably, these gifts typically accelerate the purchase timeline rather than making an otherwise impossible deal feasible. When older homeowners sell, many pass some of that equity on to loved ones. Those gifts can trigger a domino effect: each downsizing sale can free up a family-sized home for younger buyers, then seed multiple first-time purchases as wealth is transferred from one generation’s housing equity to the next.

Prioritizing Smaller Down Payments

In 2026, the “20% or bust” mindset around down payments is fading, replaced by a more strategic focus on cash flow, flexibility, and risk management.

“For some buyers, it might actually make more financial sense to keep more liquid cash on hand day-to-day instead of stretching to hit 20% down,” says Kostov. While 20% remains the benchmark for avoiding mortgage insurance, she stresses that buyers should weigh it against their need for emergency savings, upcoming life changes, and cash on hand for future savings.

Lower mortgage rates affect this, too. “The Bank of Canada first established in October the narrative that it would hold rates for an extended period, a sentiment it doubled down on in its December announcement,” Penelope Graham, mortgage expert at Ratehub.ca, explains. “This stance has only been further bolstered by the December inflation figures, as the headline number showed a 2.4% gain, up from 2.2% in November.”

This stability has ended the defensive behavior of the 2020–2023 period, when many buyers funneled every available dollar into down payments to blunt rate risk and win bidding wars.

The housing landscape has been reshaped by the December 2024 federal policy increasing the insured mortgage cap to $1.5 million. This move drastically reduced upfront costs—most notably cutting the minimum down payment for a $1.5M property by $175,000. Consequently, 2026 buyers are prioritizing cash preservation over smaller monthly payments.

Fewer Investors, More First-Time Home Buyers

For years, real estate was dominated by investors looking for profit. In 2026, however, the scales are tipping back in favor of end users, people who actually plan to live in the homes they buy. This shift is most visible in smaller cities and college towns, where a dip in prices has finally made it possible for first-time buyers to break into the market.

“Those first-time buyer price points used to be where investors were most competitive,” says Kostov. “With investors stepping back, we’re seeing a significant window of opportunity for individuals to finally enter the market.”

Buyers will see more options this spring as new listings join unsold inventory from 2025. However, increased supply won’t necessarily trigger lower prices. Because buyers are focused on monthly carrying costs while sellers cling to peak-pandemic pricing, the market is experiencing a ‘slow grind’ rather than a free-fall. Furthermore, first-time buyers are quietly tightening supply; unlike investors, they occupy the homes they buy without adding any rental or resale units back into the market

The relationship between investors and first-time home buyers has been especially tricky in larger markets like Toronto and Vancouver. A 13% price drop in Toronto may still leave many investment properties cash-flow negative at today’s rates, but for a renter comparing a mortgage payment to their current rent, that same price cut can finally tip the math in favour of ownership.

This tug-of-war has produced a deep mismatch: developers, dependent on pre-construction investor sales, churn out sub-600-square-foot units that maximize rent per square foot rather than livability. In Toronto, the median condo size fell from about 947 square feet in the 1990s to roughly 640 square feet after 2016, while investors now own nearly two-thirds of these small units. At the same time, the share of new, family-sized condos (800+ sq ft) has shrunk, forcing end users to compete fiercely for a limited pool of suitable homes even as headline inventory continues to rise.

Kostov predicts that condo prices will bottom out before seeing any recovery, noting that “2026 is not the year condos really take off again.” This downward trend is largely driven by a slump in smaller units, while larger two- and three-bedroom floor plans remain resilient, fueled by families who still need functional space in the city core.

High-End Presentation is Now Non‑Negotiable

The era of the effortless sale has largely passed. In the 2026 market, preparation has become the deciding factor for a successful listing.

“Even the best house on the best street still requires thoughtful marketing,” Kostov explains. “Buyers need to be able to immediately envision themselves in the space.” Because inventory has stabilized, buyers now have the luxury of time to think, negotiate, and—most importantly—be selective.

For this reason, Kostov notes that sellers must be fully prepared before hitting the market. A deep clean, professional staging, and an agent who can provide high-end photography are no longer “nice-to-haves” but are essential for anyone seeking a premium price. In today’s environment, a property needs a marketing plan that tells a clear story; a few quick phone photos are no longer enough to compete.

2026 buyers shortlist homes long before they ever step inside. According to the National Association of Realtors (NAR), just over half of recent buyers found the home they purchased online, and roughly seven in ten used a mobile phone or tablet during their search. A NAR 2025 staging report found that listings with professional photography and lots of images sell about a third faster and can command several thousand dollars more than similar properties with basic photos.

In higher‑inventory markets, presentation matters even more because buyers can take their time and compare options. Eighty-three percent of buyers’ agents say staging helps clients see themselves living in a home, especially in the living room and primary bedroom. The staging report also found that half of listing agents believe that professional staging and high-end media, such as immersive video tours, lead to faster sales, which is crucial when your property is competing with dozens of similar listings. In crowded markets, investing in top-tier presentation is one of the most reliable ways to stand out, get more showings, and avoid price‑cut fatigue.

What’s Next in 2026?
The defining theme of the 2026 housing market is realignment. After years of highs and lows, the market is finally becoming more affordable and has opportunities for many, from downsizers to first-time home buyers, to make a move they’ve been planning for.

From Major Downsizing to Smaller Down Payments : Zoocasa’s 2026 Canadian Housing Market Predictions by Angela Serednicki | zoocasa