One of the biggest stories of the year for Canada’s economy looks set to spill into 2026, with no end in sight to the trade war that’s rattled homebuyers and dented the housing market outlook.
Over 12 months have now passed since Donald Trump, then US president-elect, first vowed massive tariffs on Canada – the beginning of a saga that’s dominated headlines throughout 2025.
A series of tariff delays and exemptions for goods compliant with CUSMA (the Canada-US-Mexico Agreement) have staved off financial markets’ worst fears about the impact of the trade war, although it’s pushed plenty of would-be homebuyers to the sidelines amid lingering doubts about the economy.
Continuing economic uncertainty and concern about the labour market are still weighing against the housing outlook in Toronto, according to the Toronto Regional Real Estate Board (TRREB), which said positive developments on the trade front are needed to spur improved sales activity.
For now, prospects of a trade deal appear distant. Negotiators seem to have made little progress since Trump angrily cut off talks with Canada over the airing of anti-tariff ads in the US by the Ontario government. Prime minister Mark Carney, meanwhile, has been frank in his view that tariffs, in some shape or form, are here to stay.
Canadians slowly acclimatizing to stormy economy
Trade uncertainty kept the housing market in a “holding pattern” this year, REMAX Canada president Don Kottick (pictured top) told Canadian Mortgage Professional.
He expressed disappointment that the federal government has yet to reach a trade agreement with the US, seeing little chance of a positive outcome in the final weeks of this year.
But a glimmer of hope for Canada’s housing market, according to Kottick, is the fact that Canadians appear to be adjusting to the new reality and many have accepted that economic volatility will probably stick around in 2026.
Another helpful development: a series of interest rate cuts by the Bank of Canada since the middle of last year has clipped mortgage rates, with the central bank’s benchmark rate sliding by 275 basis points since June 2024.
“I think Canadians have just become comfortable with the uncertainty, and the other thing that’s happened is last year, rate declines brought a few more people off the sidelines,” Kottick said. “And now we’re at a point where I think the general consensus is that we’re not going to see any major rate decreases into Q1 and maybe even Q2 of this year.
“So I think buyers are kind of saying, ‘Hey, this is just the way things are.’ Rates aren’t going to come down substantially, and they’re probably going to start testing the market and coming back in.”
What’s in store for buyers next year?
Homebuyers across the country are likely to enjoy even more choice in 2026, with listings surging throughout this year and prices slipping in several of the most expensive cities.
REMAX’s latest survey looking ahead to the 2026 market showed that over a quarter of Canadians expect their region to be more affordable next year, while many also say another half-point or percentage-point cut to the central bank’s policy rate would boost their chances.
Still, potential homebuyers working in tariff-impacted industries may still be holding off on purchasing plans, with those US levies likely to have a big say in their employment prospects for the coming year.
Steel giant Algoma said this week it’s laying off over 1,000 workers – about 40% of its workforce – over what it described as Trump’s “unprecedented tariffs” and the impact they’re having on business.
Other areas are faring better. “November reports on employment and economic growth were much stronger than expected,” TRREB chief information officer Jason Mercer said. “The Canadian economy may be weathering trade-related headwinds better than expected.
“More certainty on the trade front coupled with positive economic impacts of recently announced infrastructure projects could improve homebuilder confidence moving forward.”
CMP
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