Canada\u2019s housing market is expected to recover in 2026 but TD Economics is not calling it a comeback year.<\/p>\n
In its latest provincial housing outlook, TD forecasts a \u201cmodest, gradual recovery\u201d this year after what it describes as a \u201cdisappointing\u201d end to 2025. Pent-up demand should help lift activity, but economist Rishi Sondhi says lingering uncertainty, a soft labour market and a neutral interest-rate environment will likely keep the rebound restrained.<\/p>\n
A Weaker Handoff from 2025<\/strong><\/p>\n \u201cAfter a robust Q3, Canada\u2019s resale housing market lost momentum in the fourth quarter, with sales dipping and average prices coming in flat compared to the prior period,\u201d Sondhi writes, pointing to a softer finish to last year. \u201cThis disappointing showing sets 2026 off on a weaker footing and is consistent with a downgrade to our sales and price forecasts for the year ahead.\u201d<\/p>\n Even so, TD says a recovery is still on the table. The bank continues to expect \u201ca modest, gradual recovery will unfold for Canada\u2019s housing market this year,\u201d supported in part by demand that has been sidelined for several years. \u201cPent-up demand will continue to be satiated and sales receive some support from solid or improved affordability in some markets,\u201d Sondhi says.<\/p>\n Interest Rates Expected to Remain Neutral<\/strong><\/p>\n Interest rates, however, are unlikely to give the market much of a boost. \u201cIn our view, interest rates will be more of a neutral factor for the outlook in 2026,\u201d Sondhi notes, adding that the Bank of Canada is likely to remain \u201con the sidelines\u201d this year.<\/p>\n That view lines up with Wednesday\u2019s rate decision from the central bank, which held its policy rate at 2.25%. The Bank said the outlook is little changed from October but warned that uncertainty is \u201cheightened,\u201d citing unpredictable US trade policy, geopolitical risks and the upcoming Canada-United States-Mexico Agreement (CUSMA) review.<\/p>\n Ontario is Canada’s “Weakest” Market<\/strong><\/p>\n Regionally, TD says Ontario continues to lag the rest of the country. The province is the \u201cweakest\u201d housing market in Canada, according to the report. \u201cDemand was hit by economic uncertainty and softness in the labour market,\u201d Sondhi says, while affordability \u201cremained stretched.\u201d A pullback by investors in the condo market has also weighed on activity, particularly in the GTA.<\/p>\n At the same time, supply has been rising as investors list properties amid higher carrying costs, difficulties closing on purchases pre-qualified at ultra-low, pandemic-era interest rates and the \u201creduced attractiveness of real estate assets due to falling prices and rents.\u201d<\/p>\n \u201cThese loose conditions should keep price growth negative, on average, in the first half of 2026,\u201d Sondhi says, before \u201cinching into positive territory\u201d later in the year supported by \u201csignificant pent-up demand.\u201d He adds that per capita home sales in Ontario were \u201csome 25 per cent below long-term averages\u201d in December.<\/p>\n BC Nearly as Soft<\/strong><\/p>\n British Columbia isn\u2019t far behind. \u201cSales tumbled about six per cent last year,\u201d Sondhi writes, contributing to a roughly three-per-cent decline in average prices. Vancouver posted an even weaker showing, with sales and prices down four per cent and 10 per cent, respectively.<\/p>\n Despite ongoing loose supply-demand conditions, Sondhi says \u201ccompositional effects\u201d \u2014 including a higher share of expensive homes selling \u2014 have helped cushion average prices, even as benchmark prices continue to soften.<\/p>\n Prairie Markets Still Outperforming<\/strong><\/p>\n Saskatchewan\u201d continues to be one of the hottest housing markets in the country,\u201d posting nine-per-cent price growth in 2025, supported by \u201csolid affordability\u201d and relatively strong job growth. \u201cWith Saskatchewan\u2019s economy set to gear down but outperform Canada\u2019s again this year, we see home price growth slowing but remaining solid,\u201d Sondhi says.<\/p>\n Manitoba and Alberta are expected to see more moderate outcomes. Alberta\u2019s market is now \u201cmore balanced,\u201d reflecting easing migration, rising listings and cooling, but still positive, job growth.<\/p>\n Atlantic Canada Remains Elevated, But Cooling<\/strong><\/p>\n Home prices across Atlantic Canada remain historically high, though TD expects growth to ease in 2026. Newfoundland and Labrador led the region in 2025, posting near double-digit price gains for a second straight year, supported by solid sales, strong economic growth and relatively favourable affordability. Tight supply has also helped keep conditions firm. Looking ahead, TD expects both price and sales growth to cool as economic momentum slows and the province records another year of net job losses.<\/p>\n Elsewhere, Prince Edward Island has largely returned to more normal conditions after several years of rapid gains, with price growth expected to track closer to trend. Nova Scotia and New Brunswick also remain relatively tight for now, but softer migration and worsening affordability should limit further upside as the year unfolds.<\/p>\n Quebec Cools After A Strong Run<\/strong><\/p>\n Quebec was one of the stronger performers in 2025, with home sales rising sharply and prices up about 15 per cent after a flat year in 2023. TD says the surge was driven by firm job and income growth and relatively strong consumer confidence, which \u201ccounts as a surprise given its exposure to the trade war,\u201d Sondhi says.<\/p>\n Looking ahead, TD expects momentum to ease. Affordability has deteriorated, job growth is expected to slow and per capita sales are well above long-term averages, suggesting less room for further gains.<\/p>\n Risks Remain on Both Sides<\/strong><\/p>\n TD also points to another headwind for 2026 : near-zero population growth, which could ripple through rental markets and investor demand.<\/p>\n Sondhi explains, \u201cThese newcomers typically have very low homeownership rates when they first enter the country, but rental demand will continue to be negatively impacted. This could feed back into investor demand, as lower rents would reduce the cash-flow from owned properties that are rented out.\u201d<\/p>\n At the same time, risks cut both ways. \u201cHousing activity has had some tendency to surprise expectations to the upside in the past,\u201d Sondhi says, particularly given the scale of pent-up demand in key markets. On the downside, upcoming CUSMA negotiations and geopolitical tensions \u201cloom large\u201d and could keep buyers on the sidelines.<\/p>\n Taken together, TD\u2019s message is straightforward : a recovery is coming, but it is likely to be slow, uneven and highly sensitive to economic and policy shifts.<\/p>\n