'Neither bust nor boom': Here's what's in store for Canadian home prices

Canadian home prices are set for a brief dip before stabilizing and recovering modestly, according to the latest Canada Housing Quarterly Chartbook from Oxford Economics.

The report, authored by Tony Stillo, director of Canada economics, and Michael Davenport, senior economist, projected that nominal prices would “briefly slide lower in the near term before recovering at a modest pace over the medium term.”

Adjusted for inflation, real house prices are expected to remain essentially flat through 2030. Market fundamentals, especially chronic undersupply, are expected to provide a floor for prices, even as new supply gradually comes online.

“Neither a bust nor a boom is likely for house prices over the next few years,” Stillo and Davenport said.

“Chronic undersupply will provide a floor for prices in the near term, but stronger growth in housing supply, particularly of lower-priced multi-unit dwellings, combined with muted investor demand, will put a ceiling on prices over the medium term. The current elevated house price-to-income ratio will also limit the upside for future price increases.”

This outlook stands in contrast to the early-to-mid 1990s, when a surge in newly completed, unabsorbed units and double-digit unemployment drove prices down. Today, while unabsorbed units are rising, the market remains undersupplied overall.

Metro markets diverge as affordability stalls

Toronto and Vancouver continue to weigh on the national picture, with prices in both metros expected to slide further in the second half of 2025 before finding a bottom in early 2026.

“Lacklustre investor demand has also contributed to weak market conditions in Canada’s largest metros, especially for condos in Greater Toronto, where Q3 prices have fallen 20% from the early 2022 peak and 6.5% since late 2024,” the report noted.

In contrast, markets in the Prairies, Eastern Canada, and Quebec have shown more resilience.

Affordability, which had improved thanks to falling prices and lower mortgage rates, is expected to stall as prices bottom and fixed rates edge higher.

Oxford’s Housing Affordability Index fell to its lowest since late 2020, but “major metros like Toronto and Vancouver will remain severely unaffordable over the long term.”

Resale and new housing outlook

Resale activity picked up over the summer, but prices continued to drift lower. Two 25-basis-point rate cuts by the Bank of Canada are expected to bring buyers and sellers back to the market, but “listings will rise faster than demand amid a deteriorating labour market and slowing population growth,” the report said.

New home construction has held up, with 139,400 starts from January to August 2025, but is expected to soften as job losses and high costs weigh on demand. Government programs such as the Build Canada Homes initiative are expected to support a medium-term recovery in building.

Risks remain, but no crash expected

While the baseline forecast is for stability, Stillo and Davenport flagged significant downside risks in the event of a global trade war or financial market correction: “Canada would suffer a deeper downturn and lower house prices under a worst-case global trade war or a financial market correction.”

The Canadian housing market appears set for a period of modest adjustment rather than upheaval. Chronic undersupply and policy support are expected to prevent a crash, but affordability challenges and regional disparities will persist. Market participants should prepare for a slow recovery, not a dramatic rebound.

CMP

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