Ayman Omar

• Weaker-than-expected performances in 2025Q4 and especially 2026Q1 have prompted a steep downgrade to our forecasts for 2026 annual average Canadian home resales and price growth. While severe weather in Central and Atlantic Canada weighed on activity early in the year, weakness was also evident in B.C., where conditions were more temperate. Sales are likely to take most of the year to recoup first quarter losses, as housing remains constrained by a subdued economy, heightened uncertainty, and ongoing cost of living pressures.
• Interest rates are expected to be a largely neutral factor for the outlook in 2026, with the Bank of Canada likely to remain on hold and no major movements expected in bond yields (which help determine fixed mortgage rates).
• Canada’s population declined last year for the first time since Confederation, driven by losses in Ontario and B.C.. Softer rental demand and falling rents are discouraging investor activity in both provinces. Alberta stands out, with the strongest population growth nationally, supported by immigration. Interprovincial migrants continue to flow into the province, bolstering ownership demand.

The number of home sales recorded over Canadian MLS® Systems was virtually unchanged (-0.1%) on a month-over-month basis in March 2026.

“Home sales activity remained at lower levels in March, as rising global economic uncertainty, along with a mid-month jump in fixed mortgage rates tied to incoming higher inflation, piled on to an already shaky economic start to the year,” said Shaun Cathcart, CREA’s Senior Economist. “2026 is still expected to see a modest amount of upward momentum in sales and a stabilization in prices as some pent-up first-time buyer demand enters the market, but the forecast for the year has had to be revised downward. The timing of higher mortgage rates, along with the perception they may be temporary, could keep would-be buyers away at the most active time of year – April, May, and June – as they wait for rates to come back down.”

March Highlights:

• National home sales were almost unchanged (-0.1%) month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 2.3% below March 2025.
• The number of newly listed properties edged down 0.2% on a month-over-month basis.
• The MLS® Home Price Index (HPI) fell 0.4% month-over-month and was down 4.7% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price was down 0.8% on a year-over-year basis in March 2026.

The provincial budget season is winding down, with just PEI and Newfoundland and Labrador still to table their FY26/27 documents. Here are five themes:

Deep deficits persist: A few provinces are slipping deeper into the red, while a few are moving to slightly shallower shortfalls. As a group, the chunky $40 billion deficit for the fiscal year just ending (FY25/26) will persist in FY26/27, with a combined shortfall of $46.7 billion expected. That’s a manageable 1.4% of GDP, but topped only twice in the past two decades: at the depth of the pandemic, and the depth of the financial crisis.

Certainly uncertain: This year’s budget season acknowledged the wild uncertainty in macroeconomic conditions. But, unlike last year, where every province seemingly took a different approach to setting an economic outlook (assume tariffs, no tariffs, publish different scenarios, etc.), this year was largely based on a ‘normal’ baseline economic outlook and a status quo on trade policy. With that in mind, the group overall has embedded more than $10 billion of contingencies into the FY26/27 fiscal plan, leaving some room for upside if the economy holds up.

Revenue gusher (for some): The two big oil-producing provinces locked in their budgets ahead of the conflict in Iran and associated surge in oil prices. Now, budget assumptions look wildly conservative. Alberta assumed $60.50 for WTI this fiscal year and Saskatchewan assumed $59.80 (Newfoundland & Labrador still to be tabled). At current levels for WTI, the light-heavy differential and the loonie, we could see upwards of $20 billion of revenue upside in those two provinces alone, swinging both well back into surplus.

Debt climbing: The combined provincial net debt-to-GDP ratio is looking to push 32% in FY26/27, which would be a fourth consecutive increase from the post-pandemic lows. Recall that there was meaningful fiscal consolidation during that period when inflation and nominal growth were ripping. Interestingly, debt ratios don’t look any worse than they did a year ago thanks to hefty upward nominal GDP revisions, but the provinces are clearly still open to borrowing. This year’s long-term borrowing program is on pace to run at around $140 billion, just a shade lower than seen over the prior two years and the pandemic high. Indeed, while the combined provincial deficit is running at $47 billion this fiscal year, combined net debt is going to surge by $80 billion, or 2.5% of GDP, which is more reflective of underlying finances. Combined with the federal government, this truer fiscal gap in Canada is closer to 4.5% of GDP.

Policy steady: There were no show-stopping policy changes at the provincial level this budget season. While there were no major tax changes, some provinces nudged taxes higher (e.g., B.C. broadening the PST base and lifting income taxes), while others pushed through some targeted policy (e.g., Ontario expanding the HST rebate on new homes to all buyers). In general, the provinces continue to focus heavily on infrastructure, still catching up to past population growth (hence the hefty borrowing program), while program spending looks to run strong at more than 4% overall. The federal government continues to do more of the stimulus leg work, and that could continue with any new measures announced in the upcoming federal fiscal update.

Although Canada faces near-term hurdles to its plans to increase AI data center infrastructure due to constrained generation and transmission capacity, the country is not out of the race to attract more of the expected capital expenditures on data centers. Many countries are also dealing with similar grid constraints, which means that regions that can adapt their electricity sectors quickly to enable new large loads to connect to supply in a timely manner will come out ahead.

This situation creates an opportunity for Canada to create conditions that can enable faster data center connection to the grid or to off-grid alternatives. The ‘bring your own generation’ model that is being explored by Alberta is one such promising tool. Data center companies in Texas are already opting for this option as it is faster than waiting to be connected to the grid. Also, other regions are considering it as a way to shelter ratepayers from the costs of building new generation and transmission for data centers. Ontario, on the other hand, can lean on its advantage as the first jurisdiction in North America to build a small modular reactor (SMR). One way to do this would be to include SMRs in the new corporate power purchase agreements program, which allows companies to procure their own generation. The proposed 40 GW offshore wind farm in Nova Scotia is another potential generation source that could support a data center industry in Atlantic Canada.

Whatever policies and tools are used, protecting ratepayers from electricity price increases will be important for gaining public support. Governments can look to jurisdictions in the U.S. and elsewhere for lessons on what can be done differently to avoid repeating actions that have contributed to rising retail electricity prices in other markets like the PJM Interconnection.

This week’s data releases and Bank of Canada (BoC) statement describe a world that could have been, with a domestic backdrop that showed signs of easing inflation. The war in Iran has upended that. With escalatory strikes on energy infrastructure this week, WTI oil prices are holding at $94 (as of the time of writing). All the focus is now on how big and persistent the energy shock will be – with the prospect of stagflation looming.

It is unfortunate that households and businesses will face this new pinch, because this morning’s retail sales data sent some positive signals. Real volumes posted a solid gain in January, taking the three-month gain to 7.7% (annualized) and February’s preliminary estimate of the nominal figure showed another solid month could be expected. After a year of fits and starts, it looks like things were just starting to turn a corner. The expected surged in gasoline and energy prices in March will muddy the picture and likely eat into the real spending figures in the months ahead.

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The war in the Middle East has increased volatility in global energy prices and financial markets, and heightened the risks to the global economy. The breadth and duration of the conflict, and hence its economic impacts, are highly uncertain.

Prior to the war, the global economy was on pace to grow at around 3%, as expected in the January Monetary Policy Report (MPR). Economic growth in the United States has moderated but remains solid, driven by consumption and strong AI-related investment. US inflation remains above target and has evolved largely as expected. In the euro area, domestic demand is supporting growth while exports have contracted. China’s economy continues to be boosted by strength in exports, but domestic demand remains weak.

Since the outbreak of the conflict in the Middle East, global oil and natural gas prices have risen sharply, and this will boost global inflation in the near-term. In addition to energy supply disruptions, transportation bottlenecks stemming from the effective closure of the Strait of Hormuz could impact the supply of other commodities, such as fertilizer. Financial conditions have tightened from accommodative levels. Global bond yields have risen, equity market prices have declined, and credit spreads have widened. The Canada-US dollar exchange rate has remained relatively stable.

While housing costs ease slightly nationally, they remain near historic highs in Ottawa, Montréal and Halifax

For years, we’ve heard that housing affordability in Canada has hit rock bottom. Despite some recent improvements, the new CMHC Housing Affordability Composite Index, launched today, shows it remains a major challenge. But this blanket statement overlooks how much housing affordability has eroded in Ottawa, Montréal and Halifax in recent years.

It’s clear the crisis is no longer limited to Toronto and Vancouver.

Housing affordability is shaped by several factors, not only how much housing is costing. It also includes having enough income to pay rent or a mortgage. It depends on supply and demand factors that determine how easy or hard it is to find a housing unit at a given price. In addition, it considers discretionary income that can be used to make space for a greater housing budget.

While many housing affordability indexes exist in Canada, most are based on a single indicator, resulting in an incomplete picture of the issue. Many also focus only on homeownership affordability, overlooking the rental housing market segment. This approach misses a key component of housing in Canada and the potential interactions between the rental and homeownership market segments.

Highlights:

• Canadian housing affordability posted an eight consecutive improvement in Q4’25. This was the longest streak of improving affordability ever recorded in the country. The mortgage payment on a representative home as a percentage of income (MPPI) fell 0.4 percentage points. Seasonally adjusted home prices rose 0.4% in Q4’25 from Q3’25; the benchmark mortgage rate (5-year term) increased 4 basis points, while median household income rose 0.8%.
• Affordability improved in 6 of the ten markets in Q4. On a sliding scale of markets from best progression to least: Vancouver, Calgary, Toronto, Edmonton, Victoria and Hamilton. On the flip side, Quebec City and Ottawa/Gatineau deteriorated in the fourth quarter, while Montreal and Winnipeg remained unchanged. Countrywide, affordability enhanced by 0.6 pp in the condo portion and 0.4 pp in the non-condo segment.

Housing affordability improved again in the final quarter of 2025, marking an eighth consecutive quarterly gain, the longest streak on record. The mortgage payment as a percentage of income fell to 51.6%, its lowest level in almost four years. Even with the recent improvement, affordability remains well above the long-term average of 40.5% since 2000. The latest progress in affordability came despite a modest increase in national home prices, the first in three quarters. The 5-year mortgage rate reversed the prior quarter’s 4-basis-point increase, declining by the same amount in Q4. This represented the seventh improvement in financing costs in the past eight quarters, offering a slight boost to affordability. With this latest movement, borrowers are financing at rates approximately 22 basis points lower than a year earlier. Income gains, however, contributed more to the improvement in the quarter than changes in interest rates. Although incomes have lagged home price growth in recent years, the gap has been narrowing, and the home-price-to-income ratio now stands at its most favourable level in five years. Affordability trends varied across regions. Vancouver and Calgary posted the largest quarterly declines in the mortgage payment as a percentage of income, helped in part by lower home prices. Toronto also enjoyed a sharp improvement despite the stabilization in home prices. In contrast, affordability worsened in Québec City and Ottawa-Gatineau, where price growth more than offset the impact of higher incomes and lower financing costs. Most of the improvements in the last year have occurred in the markets that were the most stretched, rather than in areas with relatively more affordable housing. This pattern may continue in 2026, as ongoing softness in the Toronto and Vancouver resale markets does not suggest an imminent rebound in prices especially with the ongoing slowdown in population growth. Looking ahead, assuming tepid home price increase changes over the next year at the national level, income growth is expected to remain the primary driver of further improvements in affordability, as interest rates are unlikely to provide much additional support. The Bank of Canada has indicated it is comfortable with its current stance on monetary policy and persistent government deficits worldwide could exert upward pressure on longer-term yields.

CANADA HOUSING MARKET: NATIONAL HOUSING CONDITIONS CONTINUE TO COOL

National unit sales significantly fell from December to January. This weakening in sales combined with a sharp rise in new listings contributed to lower the sales-to-new listings ratio to near the lower bound of the estimated range for balanced conditions. However, unusually inclement weather in Ontario centres contributed to amplify the slowdown in national sales in January.

National sales (in units) posted a -5.8% (sa) drop from December to January. They weakened in each of the last 3 months, posting a cumulative -10.2% decline (with sa figures) since October 2025. In January, they were 16.2% below their level in November 2024, the period when trade tensions started to emerge as the incoming U.S. administration announced its intention to increase tariffs on imports from key economic partners. Compared to the same month in 2025, national sales were 16.2% (nsa) lower in January. Following 4 months of monthly declines, new listings rose sharply in January (7.3% m/m, sa) but fell 6.2% (nsa) from the same month in 2025.

With this significant decline in sales and the sharp rise in new listings from December to January, the sales-to-new listings ratio fell from 51.3% (sa) in December to 45% in January, a 6.3 percentage points (pps) drop. This indicator of housing market conditions now stands very close to our 44.6% estimate for the lower bound of the balanced conditions range. This indicator declined by 4.1 pps (from sa figures) since January of 2025.

Highlights

• According to the 2022 Canadian Housing Survey, one-third (33.3%) of households reported moving to their current residence within the past five years.
• Upgrading to a larger or better-quality dwelling was the most common reason reported by households that moved within the past five years, cited by one in four moving households (25.3%).
• Among households that moved across provinces, employment (42.5%) was the reason cited most often, followed by wanting to be closer to family (27.6%). In contrast, 4.5% of these households reported moving to upgrade to a larger or better-quality dwelling.
• Movements within the same province but to a different municipality showed patterns that resembled aspects of interprovincial migrations and moves within the same municipality, further supporting the relevance of distance in a household’s decision to move.
• Reasons for moving also varied by age of the reference person, and further differences emerged when distinguishing intraprovincial and interprovincial moves.
• Findings suggest that in addition to the motivation to improve housing conditions and quality of life, various life events and stages of life can influence a household’s decision to move.

• Home sales fell 5.8% from December to January, marking the third consecutive monthly decline and the largest drop since February 2025 when U.S. tariffs were announced.
• New listings jumped 7.3% from December to January, their first increase in five months and the largest monthly increase since January 2025.
• Active listings increased by only 0.4% during the month due to a higher number of cancelled listings, likely due to the lack of momentum in the market.
• Market conditions eased during the month but remained balanced at the national level, which largely reflects soft conditions in Ontario and B.C., while markets in all other provinces continue to favour sellers.
• Housing starts dropped by 42.6K from 280.7K in December to 238.0K in January (seasonally adjusted and annualized), a print well below the consensus calling for 262.5K. Starts decreased in urban areas (-50.2K to 218.2K), while they increased in rural areas (+7.6K to 19.9K). In urban centres, the drop stemmed from the multi-unit segment (-51.9K to 177.0K), while the single-detached segment increased slightly (+1.7K to 41.2K). Decreases in housing starts were seen in Montreal (-11.5K to 17.6K), Toronto (-1.3K to 28.4K), and Vancouver (-0.4K to 33.5K), while Calgary (+10.2K to 25.6K) registered an increase.
• The Teranet–National Bank Composite National House Price Index declined by 0.4% from December to January after seasonal adjustment. Seven of the eleven CMAs included in the index recorded declines: Ottawa-Gatineau (-2.4%), Winnipeg (-1.0%), Toronto (-0.9%), Edmonton (-0.9%), Vancouver (-0.7%), Hamilton (-0.5%), and Victoria (-0.1%). Conversely, prices rose in Halifax (+2.0%), Quebec City (+1.6%), Montreal (+1.4%) and Calgary (+0.7%).

The number of home sales recorded over Canadian MLS® Systems fell 5.8% on a month-over-month basis in January 2026.

“The monthly decline in national home sales was driven primarily by less activity in the Greater Golden Horseshoe and Southwestern Ontario, suggesting that the story was probably more about a historic winter storm than a downshift in demand,” said Shaun Cathcart, CREA’s Senior Economist. “Notwithstanding the chilly start to the year, we continue to expect 2026 will ultimately be defined by pent-up demand from first-time buyers finally seeing a chance to enter the market.”

January Highlights:

• National home sales declined 5.8% month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 16.2% below January 2025.
• The number of newly listed properties jumped 7.3% on a month-over-month basis.
• The MLS® Home Price Index (HPI) fell 0.9% month-over-month and was down 4.9% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price dipped 2.6% on a year-over-year basis in January 2026.

Similar to what happened in January 2025, new supply jumped on a month-over-month basis in January 2026, rising 7.3% as sellers seemed eager to get the year started.

The burst of new supply was driven by about two-thirds of local markets, and led by Montreal, Quebec City, Calgary, Greater Vancouver, and Victoria. Meanwhile, Central and Southwestern Ontario were far less prominent and, in many cases, recorded declines. This reinforces the view that winter weather was a primary factor in January in those regions, as it appears to have suppressed both demand and supply.

• Canada's economy is expected to grow slowly in 2026, as the following factors weigh on demand: geopolitical and trade uncertainty, significantly lower population growth, soft labour markets and modest income growth. Growth is projected to improve slowly in 2027 and 2028.
• Housing demand is projected to gain momentum while sales stay below historical averages and prices show only modest gains after falling in 2025.
• New home construction is set to decline through 2028 as developers face high costs, weaker demand and more unsold homes. Condominium starts will be especially weak. Rental projects will continue to drive new supply but will moderate over the forecast period.
• Rental markets are moving toward balance from an overall national perspective as new supply eases pressure and rent growth slows, giving renters more flexibility before buying a home.
• Regional housing markets vary significantly. Construction and home sales in Ontario and British Columbia will be weaker than their 10-year averages while, in the Prairies and Quebec, they will remain above their historical averages. Ontario is the only region expected to see price declines in 2026.

Mortgages remain a hot topic in corporate boardrooms, around policy tables and even during family dinners. Canada is standing right in the middle of the major mortgage renewal wave—one that experts have long warned about. In the midst of this mortgage renewal wave, are Canadian homeowners able to keep up with their mortgage payments at higher rates during a time of economic uncertainty and rising unemployment?

The national mortgage arrears rate—the share of mortgage consumers who have missed payments for 90 days or more—has been increasing. However, this trend is nuanced, and its interpretation has led to some confusion. The fact is that Canadian homeowners are facing 2 distinct financial realities. On one side, are emerging risks, while on the other, mortgage arrears remain low.

On one hand, there are clear signs of household financial strain in regions like Toronto and Vancouver, where arrears are projected to continue increasing steadily. Additionally, certain groups of borrowers across the country are showing greater vulnerability than others. For these groups—especially the pandemic-era first-time homebuyers—the financial pressure is much more evident.

On the other hand, Canadian homeowners have proven to be remarkably resilient given the challenges they’ve had to navigate. While the increase in mortgage arrears has been significant (+7 bps between 2023 Q3 and 2025 Q3), arrears remain historically low.

US tariffs and the unpredictability of future trade arrangements are disrupting the Canadian economy. Growth in Canada is expected to remain modest, while inflation stays close to 2%.

The Canadian economic outlook is little changed since the October Report. Canada continues to adjust to a new trade landscape. Affected businesses are reconfiguring their trade and seeking new suppliers and markets. As this adjustment proceeds, capital will start being reallocated and some workers will shift into new roles. This adjustment will take time, and growth will be restrained through the transition.

Uncertainty remains high. The world is becoming more fragmented, and geopolitical risks are elevated. For Canada, the future of trade in North America is an important uncertainty.

Summary

• Home transactions totalled 470.3K in 2025, a 1.9% decline compared to 2024 but a stronger year than 2023.
• On a monthly basis, transactions were down 2.7% from November to December, a third decline in four months that is difficult to explain given recent interest rate cuts and improvements in the labour market.
• New listings declined by 2.0% from November to December, a fourth consecutive decline.
• Active listings edged down 0.5% from November to December, the fifth decline in six months.
• Market conditions loosened slightly during the month but continued to indicate a balanced market compared to the historical average. Still, the balanced market conditions at the national level largely reflect soft conditions in Ontario and B.C., while markets in all other provinces continue to favour sellers.
• Housing starts ended 2025 on a strong note, rising for the second consecutive month to reach 282.4K, their highest level in five months and well above consensus expectations. In 2025, there was a total of 259.0K housing starts nationwide, an increase of 5.6% compared to 2024. This makes it the third-strongest year on record for the new construction market after 2021 and 2022.
• The Teranet–National Bank Composite National House Price Index remained stable from November to December after seasonal adjustment. Six of the eleven CMAs included in the index recorded increases: Ottawa-Gatineau (+2.9%), Edmonton (+1.2%), Winnipeg (+1.1%), Calgary (+0.7%), Vancouver (+0.2%) and Quebec City (+0.1%). Conversely, prices declined in Hamilton (-1.8%), Halifax (- 1.0%), Victoria (-0.8%), Toronto (-0.5%) and Montreal (-0.2%). From December 2024 to December 2025, the composite index declined by 3.5%.

On Wednesday, January 28, 2026, the Bank of Canada held its target for the overnight lending rate steady at 2.25% for the second consecutive time, a move widely expected by analysts.

As forecast by the Bank, Canada’s Gross Domestic Product (GDP) marked robust growth in the third quarter of 2025 but is expected to be flat in final quarter of the year, when that data is released. Exports to the United States are acting as a drag on economic growth due to ongoing tariffs.

Meanwhile, the Bank noted that although employment numbers have picked up in recent months, the unemployment rate remains elevated, particularly for younger people. It’s survey of businesses also reveals few of them intend to increase their workforces.

The Bank projects economic growth of only 1.1% in 2026, as slower population growth and adjustments to U.S. protectionism act as headwinds on Canada’s economy. It also referenced the upcoming review of the Canada-US-Mexico (CUSMA) agreement as one of the major sources of uncertainty it’s watching this year.

The Consumer Price Index (CPI) inflation has been slowing recently and is trending closer to the Bank’s 2% target. Although CPI inflation is expected to stay near that level over the projected horizon, the Bank noted in its January Monetary Policy Report (MPR) inflation for items such as food services and rent remain well above their long-term averages.

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The outlook for the global and Canadian economies is little changed relative to the projection in the October Monetary Policy Report (MPR). However, the outlook is vulnerable to unpredictable US trade policies and geopolitical risks.

Economic growth in the United States continues to outpace expectations and is projected to remain solid, driven by AI-related investment and consumer spending. Tariffs are pushing up US inflation, although their effect is expected to fade gradually later this year. In the euro area, growth has been supported by activity in service sectors and will get additional support from fiscal policy. China’s GDP growth is expected to slow gradually, as weakening domestic demand offsets strength in exports. Overall, the Bank expects global growth to average about 3% over the projection horizon.

Global financial conditions have remained accommodative overall. Recent weakness in the US dollar has pushed the Canadian dollar above 72 cents, roughly where it had been since the October MPR. Oil prices have been fluctuating in response to geopolitical events and, going forward, are assumed to be slightly below the levels in the October report.

The Canadian Real Estate Association (CREA) has updated its 2026 forecast for home sales activity and average home prices via the Multiple Listing Service® (MLS®) Systems of Canadian real estate boards and associations and extended the outlook to include 2027.

One year ago, expectations were that 2025 would mark a turning point, with buyers beginning to come off the sidelines after a significant slowdown across many Canadian housing markets. That slowdown coincided with the Bank of Canada’s use of higher interest rates to fight—and ultimately win—its first battle with inflation since adopting its inflation-targeting mandate in 1992.

While the economic uncertainty resulting from U.S. tariff threats ultimately resulted in another slow year for housing in 2025, most of that weakness was front loaded in the first months of the year. Beginning in April, the market underwent a rally that saw sales climb 12% by August. While this slowed into more of a holding pattern to finish the year, it’s that mid-year upward trend that is expected to pick up once again in 2026.

A major factor underpinning this forecast for higher activity in 2026 is pent-up demand, particularly from first-time buyers, many of whom have been shut out of the market over the past four years. While interest rates have not fallen as far as many may have hoped for, they have likely fallen far enough to restore the attainability of homeownership for many, despite affordability that remains more challenging than it was prior to 2020.

CANADA HOUSING MARKET: FOR 2025, THE EARLY-YEAR OPTIMISM WAS SIDETRACKED BY RISING GLOBAL TRADE FRICTIONS AND UNCERTAINTY

National housing sales (in units) posted another monthly decline in December. The sales-to-new listings ratio—an indicator of market conditions tightness—eased modestly over this period with new listings also declining, but at a lesser pace than sales. The national MLS HPI continued its downward trend in December, consistent with easier housing market conditions nationally.

National (unit) sales fell -2.7% (sa figures) from November to December, after a -0.8% monthly decline in November. In December, they were -10.1% below their most recent peak achieved in November 2024, and –4.5% (nsa figures) below their December 2024 level. National new listings posted their fourth consecutive monthly decline in December with a -2% (sa) print. However, they were in December 0.8% higher than the same month in the previous year.

National resale market conditions eased in December, from both the previous month and from the same month in 2024. The monthly easing reflects a 0.4 percentage point decline (sa) for the sales-to-new listings ratio from November to December—as the decline in sales modestly outpaced that in new listings—as well as a modest rise in months of inventory from 4.4 to 4.5 months over this period. Second, the yearly progression in both the sales-to-new listings ratio—declining by 3.5 p.p.—and months of inventory—rising by 0.6 month—suggests easier resale conditions last December compared to a year earlier.

The number of home sales recorded over Canadian MLS® Systems declined 2.7% on a month -over-month basis in December 2025.

On an annual basis, transactions totalled 470,314 units in 2025, a decrease of 1.9% from 2024. The year was characterized by a tariff -induced flight of buyers back to the sidelines in the first quarter, followed by a decent sales rally mid -year, and a bit of a stall to finish off 2025.

“There doesn’t appear to have been much rhyme or reason to the month - over-month decline in home sales in December, which was simply the result of coincident but seemingly unrelated slowdowns in Vancouver, Calgary, Edmonton, and Montreal,” said Shaun Cathcart, CREA’s Senior Economist. “For that reason, it would be prudent for market observers to resist the temptation to trace a line from the end of 2025 into 2026. Rather, we continue to expect sales to move higher again as we get closer to the spring, rejoining the upward trend that was observed throughout the spring, summer, and early fall of last year.”

December Highlights:

• National home sales declined 2.7% month -over-month.
• Actual (not seasonally adjusted) monthly activity came in 4.5% below December 2024.
• The number of newly listed properties dropped 2% on a month -over-month basis .
• The MLS® Home Price Index (HPI) dipped 0.3% month-over-month and was down 4% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price was virtually unchanged ( -0.1%) on a year-over-year basis.

From TD Economics

• Relative to our September projection, we’ve upgraded our 2025 growth forecasts across most regions, partly on the back of data revisions that showed economies entering the year with stronger momentum than expected. We continue to see PEI, AB, SK and NF as growth leaders this year, lifted by goods-producing industries. Meanwhile, QC, MB and ON are the likely laggards, weighed down by the trade war.
• For 2026, we see commodity-producing provinces outperforming again, but their margin of outperformance is likely to shrink amid moderately lower commodity prices, most prominently crude oil. Meanwhile, with the trade war proving less damaging than initially feared, provinces more geared to U.S. trade – like ON, MB, QC, and NB – have seen upgrades to their 2026 growth forecasts.
• Provincial exports have improved mildly since the peak of the trade shock in Q2-25, but limited trade-data access has clouded recent recovery trends. We assume that current tariff rates as well as the USMCA exemptions remain in place over the forecast horizon. The outcome of USMCA renegotiations is a risk to the outlook.
• Job markets in most provinces have turned in a more resilient performance than we had expected in September. Downside surprises in unemployment rates have been most pronounced in ON, AB, QC, NB, and PEI. While we could see job markets stumble again over the next few months, we’re expecting unemployment rates to broadly peak by Q1-2026 before drifting lower thereafter.
• Significant regional variations will exist as Canada’s housing market continues its gradual improvement next year. Price growth is likely to lag significantly in Ontario and, to a lesser extent, B.C., reflecting loose supply/demand conditions. In contrast, Quebec and the Prairies are likely to see firmer price gains, underpinned by tight conditions, and decent affordability (in the Prairies).
• Population growth is projected to continue to decelerate sharply across provinces in response to recent changes in federal immigration policy. These changes are constraining labour force growth, limiting upside in provincial jobless rates and pressuring down rents and to a lesser extent consumer spending. Provinces most exposed to these effects include ON, B.C. and QC due to their higher non-permanent resident (NPR) shares.

From CMHC

Structural barriers continue to slow progress

Policies on funding, zoning reform and the Housing Accelerator Fund have contributed to progress on housing. However, delivery remains slow due to structural barriers like long permitting times and inconsistent zoning, even as policy momentum builds. Innovation and scaling in private and non-profit sectors are crucial to boosting productivity.

Canada must double housing starts annually by 2035 to close the supply gap. While momentum is growing, bold action and stronger coordination are needed to turn plans into results.

Canada’s housing delivery system

Even with incentives, Canada’s build pipeline is slow to respond. There are signs of progress in some markets like Montréal and Ottawa, but system-wide barriers remain. To accelerate delivery and close the supply gap, we need faster approvals, modernized permitting, better municipal data and scalable innovation in construction. Scale remains a key challenge across much of the construction sector.

Shifts in housing starts and rental markets

Housing starts were strong early in 2025 but slowed down later in the year. Toronto and Vancouver were hit hardest, with year-over-year numbers going down. Among key reasons for the slow-down were high interest rates, labour and material shortages, developer uncertainty and the cancellation of marginal projects. Meanwhile, starts remained strong in Alberta.

2025 saw the first meaningful easing in rental conditions but affordability remains tight. Rental market indicators are moving in the right direction overall, with vacancy rates going up and rent growth slowing, showing that the market is balancing out. However, we need to consider sustaining the market and rental supply in the long term.

• Home sales remained relatively flat (-0.6%) from October to November at the national level following a marginal 0.9% gain the previous month.
• New listings declined by 1.6% from October to November, a third consecutive decline.
• Active listings edged down by 0.6% in November as cancelled listings remained elevated despite a moderation in the previous months.
• Market conditions remained unchanged during the month and continued to indicate a balanced market compared to the historical average. Still, the balanced market conditions at the national level largely reflect soft conditions in Ontario and B.C., while markets in all other provinces continue to favour sellers.
• Housing starts rose by 21.8K from 232.2K in October to 254.1K in November (seasonally adjusted and annualized). This increase offsets some of the 48.4K decline seen in October and brings starts above consensus expectation of 250.0K. Increases in housing starts were seen in Toronto (+7.0K to 23.7K), Montreal (+5.4K to 39.1K), and Vancouver (+9.1K to 28.5K), while Calgary (-6.8K to 29.2K) registered a decline.
• The Teranet–National Bank Composite National House Price Index rose 0.4% between October and November after seasonal adjustment, marking a fourth consecutive increase for this indicator. Six of the eleven CMAs included in the index recorded increases: Halifax (+1.3%), Montreal (+1.2%), Toronto (+0.6%), Calgary (+0.3%), Victoria (+0.2%) and Vancouver (+0.1%). Prices remained stable in Hamilton and Winnipeg, while they declined in Quebec City (-0.2%), Edmonton (-0.4%) and Ottawa-Gatineau (-0.7%).

The number of home sales recorded over Canadian MLS® Systems declined 0.6% on a month-over-month basis in November 2025, still well above April levels but mostly unchanged since July.

“At this point it’s looking like the mid-year rally in housing demand has veered into more of a holding pattern heading into 2026, coupled with what looks like some price concessions in November in order to get deals done before the end of the year,” said Shaun Cathcart, CREA’s Senior Economist. “That said, the Bank of Canada’s clear signal that rates are now about as good as they’re likely going to get is the green light many fixed-rate borrowers have no doubt been waiting for, so we remain of the view that activity will continue to pick up next year.”

November Highlights:

• National home sales declined 0.6% month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 10.7% below November 2024.
• The number of newly listed properties declined 1.6% on a month-over-month basis.
• The MLS® Home Price Index (HPI) dipped 0.4% month-over-month and was down 3.7% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price was down 2% on a year-over-year basis.

New supply declined 1.6% month-over-month in November. Combined with a smaller decrease in sales activity, the sales-to-new listings ratio tightened to 52.7% compared to 52.2% in October. The long-term average for the national sales-to-new listings ratio is 54.9%, with readings roughly between 45% and 65% generally consistent with balanced housing market conditions.

From TD Economics

• Global growth has stood up to trade turmoil better than many feared earlier this year. Even with momentum expected to slow in 2026, it will be to a lesser extent than we expected three months ago.
• In contrast, the U.S. economy is forecast to gain a step as Fed rate cuts, the One Big Beautiful Bill Act (OBBBA) and regulatory changes provide a tailwind.
• Canada is also an economy of contrasts. Government initiatives to boost investment are likely to meet some resistance with 2026’s CUSMA review. The Bank of Canada has done its part, with government spending set to play an increasing role.

As the world turns the page on 2025, key global growth players are on track to meet or exceed our forecasts from earlier this year, despite the disruption from U.S. trade policy. For a variety of reasons tariffs have not proven as punitive compared to the announced tariff rates, and interest rate cuts by global central banks provided a needed tailwind (see report). Looking ahead, the same story will unfold, but a further downshift is likely as most major central banks have reached the end of rate-cutting cycles and must now ensure balanced policy against stable inflation. And while government deficits are expanding in many economies, this is not a universal theme. Some face pressures to consolidate, minimizing the global fiscal impulse next year.

China was among the forecast outperformers, albeit investment is now weakening. This most recent bump in the road will firm the resolve of authorities to prop up the economy through policy support next year. Meanwhile, governments in the eurozone are expected to ramp up spending, particularly on defense. However, it will take time for major countries to follow through on their announcements, with that fiscal impulse becoming more evident in the second half of 2026.

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

Major economies around the world continue to show resilience to US trade protectionism, but uncertainty is still high. In the United States, economic growth is being supported by strong consumption and a surge in AI investment. The US government shutdown caused volatility in quarterly growth and delayed the release of some key economic data. Tariffs are causing some upward pressure on US inflation. In the euro area, economic growth has been stronger than expected, with the services sector showing particular resilience. In China, soft domestic demand, including more weakness in the housing market, is weighing on growth. Global financial conditions, oil prices, and the Canadian dollar are all roughly unchanged since the Bank’s October Monetary Policy Report (MPR).

Canada’s economy grew by a surprisingly strong 2.6% in the third quarter, even as final domestic demand was flat. The increase in GDP largely reflected volatility in trade. The Bank expects final domestic demand will grow in the fourth quarter, but with an anticipated decline in net exports, GDP will likely be weak. Growth is forecast to pick up in 2026, although uncertainty remains high and large swings in trade may continue to cause quarterly volatility.

Canada’s labour market is showing some signs of improvement. Employment has shown solid gains in the past three months and the unemployment rate declined to 6.5% in November. Nevertheless, job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued.

CPI inflation slowed to 2.2% in October, as gasoline prices fell and food prices rose more slowly. CPI inflation has been close to the 2% target for more than a year, while measures of core inflation remain in the range of 2½% to 3%. The Bank assesses that underlying inflation is still around 2½%. In the near term, CPI inflation is likely to be higher due to the effects of last year’s GST/HST holiday on the prices of some goods and services. Looking through this choppiness, the Bank expects ongoing economic slack to roughly offset cost pressures associated with the reconfiguration of trade, keeping CPI inflation close to the 2% target.

From CMHC

Housing affordability is challenging Canadians. To address this, CMHC has shown that we need to double housing starts over the next decade. Meeting this goal will require building smarter and faster, with governments and business working together. While governments can improve regulations, the residential construction industry will need to invest to improve its productivity. What are the current productivity challenges in building housing in Canada, and what solutions show the most promise?

Productivity measures how much output, such as housing, is produced for each hour of work. Increasing productivity isn’t about working more hours—it’s about working smarter. This means investing in the latest tools and equipment, ensuring workers have top-notch skills. It also involves using innovative and effective management techniques and reorganizing businesses to take advantage of these improvements.

The productivity performance of the residential construction industry has been much weaker since the pandemic, contributing to the loss of housing affordability. The Centre for the Study of Living Standards estimates that lost productivity from 2019 to 2024 added $6 to $8 billion to housing construction costs in Canada. This accounts for up to 20% of the increase in new home prices. Boosting productivity in residential construction would also strengthen Canada’s overall economic performance. In 2024, residential construction accounted for 4.2% of business-sector employment but only 3.3% of business-sector value added.

• Canada has experienced around 300 catastrophic weather events since 1983, with both the frequency and cost of these disasters rising significantly in recent years.
• Over 60% of total insured losses caused by weather disasters between 2008 and 2024 stemmed from damage to personal property.
• Average insured personal property losses have nearly doubled in the past five years compared to previous years, putting significant pressure on Canada’s home insurance sector for both insurers and households faced with rising home insurance rates.
• The increase in home insurance costs was generally higher in areas that have experienced greater insured damages from weather disasters. As well, some highly-impacted areas also face rising deductibles or reduced coverage for certain perils like hail or floods.
• Fiscally-constrained governments are also rethinking the level of financial assistance provided through disaster recovery programs to support communities recovering from uninsurable losses as costs of weather disasters rise.

Canada has had over 300 catastrophic weather events since 1983. These are currently defined as weather disasters that cause at least $30 million in insured losses, though lower thresholds were used prior to 2022. The average number of annual catastrophic events has increased over time as have insured losses associated with these events. Insured losses vary by province with Alberta accounting for the largest share of total insured losses between 1983 and 2024, followed by Ontario and Quebec. The three provinces are the only ones that have been hit by billion-dollar-plus catastrophic events so far, with Alberta alone having had five as of 2024.

More than 60% of insured losses from 2008 to 2024 were due to damage to personal property. In addition, the costs have increased substantially in recent years with insured damages to personal property during 2020-2024 being almost twice their level in the previous decade. Moreover, the insurance industry in Canada incurred underwriting losses in the personal property line of business in 2023 and 2024 as insured damages and operational expenses exceeded revenue earned from premiums.

These changes have contributed to rising home insurance premiums, especially in areas hardest hit by severe weather, with Alberta being the most notable example of the variation in insurance cost increases between more and less vulnerable areas. Additionally, high-risk areas face other adjustments to home insurance policies including higher deductibles – for example, for hail coverage in areas that have experienced substantial damage from hailstorms. In worst case situations, insurance coverage is simply not available for certain perils such as overland flooding in areas of the country deemed most at risk of flooding. Meanwhile, as households that are most vulnerable to severe weather are feeling the squeeze from the private insurance market, government disaster recovery programs, which have historically acted as an insurer of last resort, are also beginning to restrict the level of support provided to impacted communities as these programs are also contending with rising costs of extreme weather.

After a decline in September, housing sales in October were back on their upward trend that started last April. This sales performance and a decline in new listings contributed to tighten the sales-to-new listings ratio in October. Also, during that month, the national MLS House Price Index posted its first monthly rise—albeit modest—since November 2024.

Unit sales rose nationally by 0.9% (sa figures) from September to October, partially offsetting the -1.6% decline from August to September. Sales are back on the upward trend they have been exhibiting since their most recent trough in March of this year when economic uncertainty was rising with trade tensions. From the same month in 2024, sales declined -4.3% (nsa) in October. National new listings posted a -1.4% (sa) monthly decline in October, the second in a row with a -0.8% decline in the previous month. Despite these monthly declines, new listings have been generally trending up in 2025, and in October were higher by 4.3% (nsa) than in the same month in 2024.

With the monthly rise in national (unit) sales and the decline in new listings, the sales-to-new listings ratio tightened (rose) by 1.2 percentage point in October to 52.2% (sa), still in the lower half of the estimated balanced conditions range for this indicator. The other indicator of market tightness we track—months of inventory—was at 4.4 nationally in October (sa figures), mostly stable at that level since July of this year, and below its 5.2 long-term (pre-pandemic) average. As in previous months, this market-tightness indicator was below its long-term average in most provinces, except in British Columbia and Ontario at 0.9 months above this average for both.

For the first time since November 2024, the national MLS House Price Index (MLS HPI) posted a monthly rise in October, but relatively modest at +0.2% (sa). This price index declined -3.0% (nsa) from the same month last year and, from sa figures, is now 26.7% above its December 2019 level but nearly 18% below its February 2022 historical peak.

From September to October 2025, sales increased in 18 of the 30 reported local markets we monitor while the sales-to-new listings ratio tightened (increased) in 17 of these markets. But as for Canada, this latter indicator of market conditions cooled in 22 of these markets.

• Canadian home resales increased by 0.9% from September to October, the sixth increase in the last seven months. Despite the recovery in previous months, sales were still 7.5% below their most recent peak in November 2024.
• On the supply side, new listings declined 1.4% from September to October, a second consecutive decline.
• Active listings increased by 0.9% in October, following a contraction in the prior month as cancelled listings have recently moderated.
• Market conditions remained unchanged during the month and continued to indicate a balanced market compared to the historical average. Still, this largely reflects soft conditions in Ontario and B.C., while markets in all other provinces continue to favour sellers.
• Housing starts fell 16.6% in October to a seven-month low of 232.8K (seasonally adjusted and annualized). The loss was concentrated in Ontario, where starts plunged 51.8% in the month, largely because of a 61.7% decline in Toronto. Vancouver also saw a decrease (-16.9% to 19.4K), while Calgary (+37.9% to 36.1K) and Montreal (+8.7% to a 16-month high of 33.6K) posted gains.
• The Teranet–National Bank Composite National House Price IndexTM rose 0.4% from September to October after seasonal adjustment, marking a third consecutive increase for this indicator. Eight of the 11 CMAs included in the index saw increases, led by Quebec City (+2.5%), Winnipeg (+1.7%), Ottawa-Gatineau (+1.4%) and Victoria (+0.6%). From October 2024 to October 2025, the composite index fell by 2.6%, on decreases in Toronto (-7.2%), Vancouver (-4.5%) and Hamilton (-4.0%). These declines were partially offset by gains in Quebec City (+15.7%), Winnipeg (+5.4%) and Edmonton (+5.3%)

• Among the 61% who have adjusted their holiday shopping plans due to tariff concerns, one quarter (25%) started holiday shopping earlier this year to avoid potential price increases as a result of tariffs.
• 41% will cut back on spending this holiday season.
• Canadians plan on spending an average of $2,310 this holiday season.

The latest BMO Real Financial Progress Index reveals 61% of Canadians are changing their holiday spending plans this year in anticipation of rising costs caused by tariffs.

• 37% are trying to buy gifts minimally affected by tariffs, including purchasing goods made in Canada.
• 25% started their holiday shopping earlier to avoid potential price increases.
• 15% are budgeting to spend more on gifts in anticipation of higher prices.

"In the wake of recent tariff increases, rising unemployment, and an upturn in inflation, it's not surprising that Canadian consumers are feeling a sense of trepidation heading into the holiday season," said Sal Guatieri, Senior Economist, BMO. "Though not elevated, annual CPI inflation has picked up to 2.4% in September after remaining below 2% in the previous five months, partly due to a 3.8% rise in food costs. By weakening the economy, the trade war has lifted the unemployment rate, undermining consumer confidence and income growth."

The number of home sales recorded over Canadian MLS® Systems edged up 0.9% on a month-over-month basis in October 2025, marking six monthly gains in the last seven months.

“After a brief pause in September, home sales across Canada picked back up again in October, rejoining the trend in place since April,” said Shaun Cathcart, CREA’s Senior Economist. “With interest rates now almost in stimulative territory, housing markets are expected to continue to become more active heading into 2026, although this is likely to be tempered by ongoing economic uncertainty.”

October Highlights:

• National home sales climbed 0.9% month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 4.3% below October 2024.
• The number of newly listed properties declined 1.4% on a month-over-month basis.
• The MLS® Home Price Index (HPI) edged up 0.2% month-over-month but was down 3% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price was down 1.1% on a year-over-year basis.

New supply declined 1.4% month-over-month in October. Combined with an increase in sales activity, the sales-to-new listings ratio tightened to 52.2% compared to 51% recorded in September. The long-term average for the national sales-to-new listings ratio is 54.9%, with readings roughly between 45% and 65% generally consistent with balanced housing market conditions.

There were 189,000 properties listed for sale on all Canadian MLS® Systems at the end of October 2025, up 7.2% from a year earlier but very close to the long-term average for that time of the year.

As the federal government launches a new drive to address Canada’s housing crisis with Build Canada Homes, a new report released today by the National Housing Council (NHC) offers a comprehensive framework to assess the effectiveness of federal housing policy.

The report entitled Measuring What Matters: Proposing an Outcomes Framework for Federal Housing Policy, tackles a central question: how will Canadians know if housing policies are working?

Analysing the current health of Canada’s housing system, the report finds that:

• Affordability is declining: Home ownership is affordable in fewer than 20% of Canadian markets, and asking rents are unaffordable for most renters.
• Housing transitions are stalling: Canadians face increasing barriers to moving through the housing system, from renting an apartment, to moving into ownership and from a first-owned home to a family-sized unit.
• Equity gaps persist: Lower-income households, women, Indigenous people, racialized communities, and other equity-denied groups experience worse housing outcomes.
• Supply challenges are growing: Rising costs of materials, land, labour, and municipal fees, along with approval delays and labour shortages, are driving a cost-of-delivery crisis.
• Policy misalignment remains: Success is often measured by inputs and outputs - such as dollars spent and units built - rather than improvements in housing outcomes.

Grounded in the National Housing Strategy Act and the principles of the right to adequate housing, the report states that outcomes for people are what matter most when assessing if housing policies are working.

Canada can look to international examples where consolidating and scaling the housing system have helped sustain housing supply and affordability.

According to a 2016 McKinsey report, the construction industry remains one of the least digitized sectors. Out of 22 industries reviewed, construction ranked second to last – just ahead of…hunting and agriculture. Nearly a decade later, little progress has been made in how we build homes.

Canada’s housing sector feels stuck in an everlasting hunting-gathering era, resisting modernization. A large part of the solution to digitize our housing industry lies in scaling up to generate sufficient financial, human and technological resources to innovate.

Canada can learn from the Netherlands, which has achieved scale in the housing sector, including with not-for-profit affordable housing providers.

In 2024, Canada had 40,349 businesses that employed workers in the residential construction industry. Of these, only 6 businesses had more than 500 employees. The majority (69.5%) were micro businesses with just 1 to 4 employees.

The same trend applies to the real estate lease management industry. While specific data for residential leasing is not available through the Canadian Industry Statistics, broader data for the real estate leasing and management sector tell a clear story: Of the 30,099 businesses that employ workers, 81.4% had less than 5 employees. By comparison, 59.2% of businesses across the entire economy fall into the micro-business category.

Highlights

• Missing Middle is a broad term for gentle- to-medium-density housing types such as accessory suites, multiplexes, row homes, stacked townhouses and low-rise apartments. These housing types are often underrepresented in new supply.
• Missing Middle housing starts across Canada’s 6 major cities (Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montréal) increased by an average of 5% per year between 2018 and 2023. This was followed by an exceptional 44% surge between 2023 and 2024.
• Edmonton and Calgary lead the way in Missing Middle housing starts, supported by a lower regulatory burden, abundant land availability and favourable policy environments. Meanwhile, Toronto and Vancouver lag where denser forms of housing have historically been more feasible.
• The prevalence, type and location of new Missing Middle housing construction projects vary widely across cities. Factors such as land costs, developer expertise and evolving local policies play a key role.

This report shares insights into the creation of “Missing Middle” housing options since 2018 in Canada’s 6 major cities: Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montréal.

Missing Middle housing is important as it provides a layer of supply that can be delivered within existing neighbourhoods. It can often be faster to develop — especially when rezoning isn’t needed — and requires less capital investment than larger projects. It broadens housing choices for families who can’t afford single-detached homes and find high-rise apartments do not offer enough space for their needs.

Stakeholders, particularly policymakers at the municipal government level, working to encourage this kind of development, can benefit from understanding its prevalence in their communities. They can also gain insights into what built form it takes, its location and the reasons behind regional differences.

The Canadian economy is adjusting to steep US tariffs on several industries and coping with elevated uncertainty. Tariffs have led to a fall in the demand for Canadian goods, affecting the broader economy. The reconfiguration of global trade and domestic production is also leading to higher costs. Total inflation has been around 2%, while underlying inflation has continued to be about 2½%.

With US tariffs and limited Canadian counter-tariffs in place, the effects of the trade conflict on growth and inflation in Canada are becoming clearer. Exports to the United States have fallen, and business investment has declined. The structural shift in the Canada-US trade relationship has put the economy on a lower path. At the same time, the reconfiguration of global trade and the restructuring of the Canadian economy are adding costs and putting upward pressure on inflation.

Considerable uncertainty remains around US tariffs and how changes to global trade relationships will affect economic growth and consumer prices in Canada. This uncertainty includes the review of the Canada-United States-Mexico Agreement.

How other major structural changes—such as shifting demographics and the adoption of artificial intelligence—will affect the Canadian economy is also unclear. The effects of these developments on output and inflation will play out over many years.

Monetary policy cannot offset the long-term implications of US tariffs or other sources of structural change. The primary focus of monetary policy is to maintain low and stable inflation.

The Bank of Canada today reduced its target for the overnight rate by 25 basis points to 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

With the effects of US trade actions on economic growth and inflation somewhat clearer, the Bank has returned to its usual practice of providing a projection for the global and Canadian economies in this Monetary Policy Report (MPR). Because US trade policy remains unpredictable and uncertainty is still higher than normal, this projection is subject to a wider-than-usual range of risks.

While the global economy has been resilient to the historic rise in US tariffs, the impact is becoming more evident. Trade relationships are being reconfigured and ongoing trade tensions are dampening investment in many countries. In the MPR projection, the global economy slows from about 3¼% in 2025 to about 3% in 2026 and 2027.

In the United States, economic activity has been strong, supported by the boom in AI investment. At the same time, employment growth has slowed and tariffs have started to push up consumer prices. Growth in the euro area is decelerating due to weaker exports and slowing domestic demand. In China, lower exports to the United States have been offset by higher exports to other countries, but business investment has weakened. Global financial conditions have eased further since July and oil prices have been fairly stable. The Canadian dollar has depreciated slightly against the US dollar.

Canada’s economy contracted by 1.6% in the second quarter, reflecting a drop in exports and weak business investment amid heightened uncertainty. Meanwhile, household spending grew at a healthy pace. US trade actions and related uncertainty are having severe effects on targeted sectors including autos, steel, aluminum, and lumber. As a result, GDP growth is expected to be weak in the second half of the year. Growth will get some support from rising consumer and government spending and residential investment, and then pick up gradually as exports and business investment begin to recover.

The number of home sales recorded over Canadian MLS® Systems declined by 1.7% on a month-over-month basis in September 2025, ending a string of gains that began in April. That said, it was still the best month of September for sales since 2021.

The small monthly decline was the result of lower sales activity in Greater Vancouver, Calgary, Edmonton, Ottawa, and Montreal, which more than offset gains in the Greater Toronto Area and Winnipeg.

“While the trend of rising sales that began earlier this year took a breather in September, activity was still running at the highest level for that month since 2021, and that was true in July and August as well, said Shaun Cathcart, CREA’s Senior Economist. “With three years of pent-up demand still out there and more normal interest rates finally here, the forecast continues to be for further upward momentum in home sales over the final quarter of the year and into 2026.”

September Highlights:

• National home sales declined 1.7% month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 5.2% above September 2024.
• The number of newly listed properties edged down 0.8% on a month-over-month basis.
• The MLS® Home Price Index (HPI) was little changed (-0.1%) month-over-month and was down 3.4% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price ticked up 0.7% on a year-over-year basis.

• Home sales decreased by 1.7% from August to September at the national level, the first contraction following five consecutive monthly increases.
• On the supply side, new listings edged down 0.8% from August to September, the first decline in three months.
• Active listings decreased by 1.7% in September, the third contraction in four months as cancelled listings continue to be elevated.
• Market conditions remained unchanged during the month and continue to indicate a balanced market compared to the historical average. Still, the balanced market conditions at the national level largely reflect soft conditions in Ontario and B.C., while markets in all other provinces continue to favour sellers.
• Housing starts rose by 34.7K from 244.5K in August to 279.2K in September (seasonally adjusted and annualized). This increase offsets some of the 48.6K decline seen in August and brings starts above consensus expectation of 257.5K. Starts rose in urban areas (+34.9K to 254.3K), while they remained essentially unchanged in rural areas (-0.2K to 24.9K). In urban centres, the gain stemmed mainly from the multi-unit segment (+34.0K to 213.3K), while the increase in the single-detached segment was more muted (+0.9K to 41.0K).
• The Teranet–National Bank Composite National House Price Index rose by 0.2% from August to September after seasonal adjustment. Six of the 11 CMAs included in the index saw increases: Montreal (+2.4%), Quebec City (1.3%), Hamilton (+1.3%), Halifax (+1.1%), Vancouver (+0.1%) and Ottawa-Gatineau (+0.1%). Conversely, prices declined in Winnipeg (-1.2%), Calgary (-0.8%), Toronto (-0.3%) and Edmonton (-0.1%), while they remained stable in Victoria.

By TD Economics

• 2025 is shaping up to be a modestly better year than expected in our prior forecast. However, our provincial growth rankings are largely unchanged. Observed weakness in large manufacturing bases in Central Canada is as expected, while idiosyncratic factors are driving firmer performances elsewhere.
• Exports coast-to-coast dipped in the second quarter following a front-running of export activity to the U.S. the quarter prior. The outlook for Canadian trade has marginally improved as effective tariff rates have come in lower than our expectations. Across provinces, nominal exports to the U.S. from Quebec, Saskatchewan and Alberta have underperformed the nation as a whole. Evidence of an export rotation to non-U.S. markets is limited, with Ontario, Alberta, Newfoundland and PEI showing some promise.
• All provinces have taken steps towards the removal of interprovincial trade barriers. Ontario has arguably gone the furthest, followed by Nova Scotia, Manitoba, B.C. and PEI. Newfoundland and Labrador and New Brunswick have been more cautious. These encouraging developments could help offset some of the disruption caused by the Canada U.S.-trade war, but the scale of the boost could be limited. Notably, geographic barriers still exist, and not all provinces have trade agreements in place.
• We’re retaining our view that Canadian housing will continue its recovery, fueled by pent-up demand in B.C. and Ontario, although loose conditions will restrain the extent of price gains in these two markets. Activity remains considerably firmer outside of these two markets, with mid-to-high single-digit price growth performances on tap in the Atlantic, most of the Prairies and Quebec this year and next.
• Canada’s job market has recently shed over 100k jobs, driving the national unemployment rate to a cyclical high. Ontario has disproportionately absorbed the shock so far this year as its unemployment rate has risen faster than in other regions. We expect unemployment rates to drift lower as employment mildly improves and labour force growth stalls on the back of a standstill in population growth.
• Commodity producing provinces are still better positioned to weather trade-related headwinds. Production of key commodities in Alberta, BC, and Saskatchewan continues to trend higher as market demand has yet to wane. Some prices, particularly crude oil, have softened relative to our last forecast, but a broad-based mild recovery in commodity prices is expected through next year.

By TD Economics

• Despite all the twists and turns in U.S. trade policy, our forecast for the global economy is broadly unchanged from our June view.
• Ditto for the U.S. economy, at least on the surface. Consumers have pulled back as the labor market has cooled, but that has been offset by strong business investment. The Fed is expected to cut interest rates further to support the labor market that has cooled further than previously believed.
• Canada’s exports have been hit hard by U.S. tariffs, but consumer spending has shown surprising resilience buoyed in part by a pull-forward in auto purchases and in the face of tariffs. Interest rate cuts have contributed to an uptick in housing activity broadly but are no panacea for the structural headwinds that will continue to weigh on Canada’s economy.

Economists are still suffering from whiplash following the twists and turns of U.S. trade policy. But despite all the back and forth, our forecast for the global economy is broadly unchanged from our view in June. Global growth is on track to advance 3.1% this year, with a slight slowdown in the cards for 2026. In the euro area, GDP rose at a 0.4% annualized pace in Q2, slightly above expectations but sharply slower than the 2.4% pace in Q1. China expanded 5.2% year-on-year in Q2, stronger than forecast, though weak credit growth and continued property stress point to softer momentum in the second half. Japan’s economy grew at a 1.0% annualized rate, beating expectations.

On the trade front, risks have eased for now: the U.S. capped tariffs on the EU at 15% in July, the U.S. extended their truce with China and Mexico in August for 90 days, and the U.S. and Japan reached a limited accord preserving market access. Yet frictions persist, with China imposing new duties on European agricultural goods, and there remains considerable uncertainty around the direction of trade policy once temporary truces expire and if the U.S. Supreme Court rules against the legality of IEEPA tariffs. Front running leading up to President Trump’s reciprocal tariff deadline, originally set for July but subsequently delayed, led to a pull-forward of industrial output and inventory builds. This will likely result in a choppy pace of growth across both advanced and emerging markets depending on trade exposures. The result is a global economy that continues to advance on average, but at an unspectacular pace with divergence among countries. This modest pace is supported by domestic demand and services but constrained by weak goods trade and unsettled policy risks.