Real estate is not only a major source of wealth for Canadians, it’s also one of the country’s top economic drivers. Jordan Gowling looks at how one of the worst housing markets in decades could drag on jobs, government revenues and the stability of the financial system<\/p>\n
Published Aug 18, 2025 \u00a0\u2022\u00a0 Last updated 7\u00a0hours ago \u00a0\u2022\u00a0 12 minute read<\/p>\n
<\/a><\/p>\n You can save this article by registering for free here<\/a>. Or sign-in<\/a> if you have an account.<\/p>\n Holly Calderwood has worked in the Vancouver real estate industry<\/a> for two decades, and there\u2019s only been a handful of times when she has seen the housing market<\/a> this bad.<\/p>\n \u201cI think the last time I saw this was in 2008-2009 during the financial crisis,\u201d she said. \u201cAnd in 2020 during COVID-19.\u201d<\/p>\n Article content<\/p>\n Article content<\/p>\n Calderwood has built a career specializing in selling luxury real estate from condos to waterfront properties, and she has recently noticed both a decline in sales and prices, as well as a rise in foreclosures.<\/p>\n Advertisement 2<\/p>\n This advertisement has not loaded yet, but your article continues below.<\/p>\n THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY<\/p>\n Subscribe now to read the latest news in your city and across Canada.<\/p>\n Exclusive articles from Barbara Shecter, Joe O’Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world’s leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.<\/p>\n SUBSCRIBE TO UNLOCK MORE ARTICLES<\/p>\n Subscribe now to read the latest news in your city and across Canada.<\/p>\n Exclusive articles from Barbara Shecter, Joe O’Connor, Gabriel Friedman and others.Daily content from Financial Times, the world’s leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.<\/p>\n REGISTER \/ SIGN IN TO UNLOCK MORE ARTICLES<\/p>\n Create an account or sign in to continue with your reading experience.<\/p>\n Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.<\/p>\n THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.<\/p>\n Create an account or sign in to continue with your reading experience.<\/p>\n Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an Account<\/p>\n or<\/p>\n Article content<\/p>\n \u201cIt really picked up last year, but this year, too,\u201d she said. \u201cA lot of foreclosures and then you just see the price dropping. Sometimes people are losing a couple of million.\u201d<\/p>\n Top Stories<\/p>\n Thanks for signing up!<\/p>\n Article content<\/p>\n Calderwood attributes the causes for that trend to homeowners renewing at higher interest rates<\/a>, a foreign buyer ban and a trade war with the United States<\/a> that has put a damper on investment sentiment and demand.<\/p>\n Economists and industry insiders say some markets have entered a buyer\u2019s market for the first time in years, with cities such as Toronto, Vancouver and even Calgary recording significant drops in sales activity and posting record highs in inventory.<\/p>\n That could be a sign of price bubbles bursting, which is welcome news for would-be buyers, but could also spell trouble for the Canadian economy,<\/a> which has relied on housing in recent years as an important economic driver, and it could lead to a drag on jobs, government revenues and the stability of the financial system.<\/p>\n The housing market recently peaked in mid-2022, before it started declining as the Bank of Canada<\/a> began raising interest rates to deal with post-pandemic inflation<\/a>. Earlier this year, the industry was hoping the market would begin a slow recovery after the central bank began delivering rate relief in 2024. Data from June and July seem to suggest a pickup in activity, but prices and sales are down compared to last year.<\/p>\n Article content<\/p>\n Robert Hogue, assistant chief economist at Royal Bank of Canada<\/a>, projects home resales will decline 3.5 per cent in Canada to 467,100 units in 2025, with the drop largely concentrated in Ontario and British Columbia.<\/p>\n Trade uncertainty and general worries about the Canadian economy have been blamed for the slowdown, but some markets have also become unaffordable for many buyers.<\/p>\n \u201cWe have had a structural shift in interest rates,\u201d Charles St-Arnaud, chief economist at Alberta Central, said. \u201cThat changed the affordability equation quite significantly for many markets.\u201d<\/p>\n He said mortgage rates<\/a> are 150 basis points higher than they were in the decade before the pandemic and that has left a lot of would-be buyers not being able to afford what they thought they could afford.<\/p>\n \u201cThat\u2019s why we\u2019ve been seeing prices going nowhere; no one can afford to overbid for a house in aggregate,\u201d he said.<\/p>\n Article content<\/p>\n Some politicians like to talk about lowering housing market prices as a social good, but housing and real estate investments remain a key economic driver for Canada and investors need to know they\u2019ll get a return on their money.<\/p>\n In May, Canada\u2019s newly appointed Housing Minister Gregor Robertson said the quiet part out loud when he was asked whether house prices should go down.<\/p>\n Article content<\/p>\n \u201cNo, I think that we need to deliver more supply, make sure the market is stable,\u201d he said during a scrum on Parliament Hill. \u201cIt\u2019s a huge part of our economy.\u201d<\/p>\n Last year alone, the housing sector contributed $143.4 billion to the economy and supported 1.2 million jobs. Someone buying a home often translates into spin-off consumption in other areas of the economy, such as household appliances, renovation services and materials.<\/p>\n \u201cYou\u2019ve often heard the saying in the U.S. that when the housing market is doing well, the general economy is doing well,\u201d St-Arnaud said. \u201cStrong housing starts, strong building construction, have a lot of spillover to the rest of the economy.\u201d<\/p>\n Residential investment contributed 10 per cent to Canada\u2019s gross domestic product (GDP) in 2021 during the pandemic housing boom and 7.5 per cent in 2023. The total value of housing assets grew to $4.2 trillion last year, representing 25 per cent of national wealth.<\/p>\n The total residential dollar value of all homes sold in Canada in June was $33.1 billion, according to the Canadian Real Estate Association<\/a>, compared to $25.1 billion in June 2019, which represents a 24 per cent increase in six years. This has been helped by an increase in the average home price, which climbed to $691,634 in June from $505,500 in June 2019.<\/p>\n Article content<\/p>\n Mike Moffatt, an economist and founding director of the Missing Middle Initiative at the University of Ottawa,\u00a0said governments are trying to achieve two things at once: restore affordability while also maintaining an environment that encourages confidence in the market and developers to keep building.<\/p>\n \u201cThe governments are trying to do two things that are, on the face of it, inherently contradictory,\u201d he said. \u201cWe do need prices to fall. But we\u2019ve seen over the last three years what happens when prices continue falling. It basically just breaks the economics for builders by eliminating the incentive to build. That creates a challenging situation where we want low prices, but we also want to create the conditions for builders to build more.\u201d<\/p>\n Moffatt said all levels of government benefit from housing development, often through development charges, HST\/GST and other fees.<\/p>\n Article content<\/p>\n But cracks are starting to show in this industry. The condo markets in Ontario and British Columbia<\/a> have experienced significant losses in pricing value, with signs of financial distress in the sector. What used to be an attractive area for investors to park their money is no longer the case.<\/p>\n Condo apartment sales have dropped by 75 per cent in the Greater Toronto Area and 37 per cent in Vancouver since the pandemic peak in 2022, according to Canada Mortgage and Housing Corp. (CMHC).<\/a><\/p>\n Article content<\/p>\n \u201cThe story of the dog-crate condominiums is well understood here in Toronto and in downtown Vancouver,\u201d Ron Butler, a mortgage broker and host of the Angry Mortgage Podcast, said.<\/p>\n He said buyers who bought at preposterous prices five years ago, particularly in the pre-construction condo market, will not be able to see a return on their investment. Even worse, a number of condo projects in Canada\u2019s two largest cities have entered receivership or been cancelled over the last two years.<\/p>\n One reason for the industry\u2019s decline is that Canada\u2019s population growth<\/a> slowed to a crawl at the beginning of this year after several years of record-breaking growth in immigration.<\/a> Some economists credited the previous surge in newcomers for masking the underlying weaknesses in the economy coming out of the pandemic as well as for keeping housing demand high in urban centres.<\/p>\n Butler said a combination of immigration curbs introduced last fall by the federal government and an increased number of for-purpose rentals entering the market are now the biggest contributors to a decline in rental prices.<\/p>\n \u201cYou literally couldn\u2019t imagine a worse set of circumstances (for these investors),\u201d he said.<\/p>\n Article content<\/p>\n Condo prices in Toronto\u2019s surrounding suburbs are recording even more significant drops than in the city itself, according to a recent report by Moody Analytics. For example, prices in Halton Hills have fallen by as much as 50 per cent from their peak.<\/p>\n Article content<\/p>\n Prices are dropping elsewhere, too. The average national price of a one-bedroom rental unit in Canada decreased 3.6 per cent year over year to $1,857 in May 2025, according to the latest National Rent Report by Rentals.ca and Urbanation Inc.<\/a><\/p>\n \u201cOdds are that rent is probably going to continue falling over the near term, so I wouldn\u2019t expect investors to make their way back anytime soon,\u201d Hogue said.<\/p>\n He said the 10 per cent decline from the peak prices in the Toronto area is significant, but it has not completely reversed the price run-up experienced during the pandemic.<\/p>\n \u201cA 10 per cent price decline historically would have been very significant and a big correction,\u201d he said. \u201cBut after the period we have gone through, it\u2019s only reversing a small fraction of the price increase we saw during the pandemic.\u201d<\/p>\n Timing and speculation<\/p>\n Investor speculation in the real estate industry has often been a point of criticism from housing advocates. Butler said today\u2019s condo market debacle is what happens when you build a product solely around the priorities of investors instead of homeowners since it can lead to an oversupply of a product no one wants or can afford.<\/p>\n \u201cThe model of building high-rise condos is that you have to sell 75 per cent of the building on a presale basis, with people who will give you 20 per cent down,\u201d he said. \u201cFirst of all, a lot of first-time homebuyers don\u2019t have the 20 per cent or need to come by it slowly, and, secondly, most of the 75 per cent of presales were comprised of investors.\u201d<\/p>\n Article content<\/p>\n![\"Homes](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2025\/08\/housing-0915-ph.jpg\")
Homes under construction in Bradford, Ontario. Photo by Tyler Anderson\/National PostArticle content<\/p>\n![\"Financial](\"https:\/\/dcs-static.gprod.postmedia.digital\/19.3.2\/websites\/images\/identity\/logo-identity-fp.svg\"){kind=logo}
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Gregor Robertson, seen here in 2018, is now Minister of Housing and Infrastructure. While Mayor of Vancouver he strove to end homelessness. Photo by Jason Payne\/PostmediaBy the numbers<\/p>\n![\"Mike](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2025\/08\/mike-moffatt-0815-ph.jpg\")
Mike Moffatt, of the Missing Middle Initiative, said governments are trying to do two things that are, on the face of it, inherently contradictory \u2014 lower housing prices while encouraging building. Photo by ERROL MCGIHON\/ Postmedia<\/p>\n![\"Toronto](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2025\/08\/condos-0815-ph.jpg\")
Condo apartment sales have dropped by 75 per cent in the Greater Toronto Area. Photo by Cole Burston\/Bloomberg<\/p>\n
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