Market Analysis

Canada's Housing Market in 2026: A Qualified Recovery, a Collapsing Supply Pipeline, and a Foreign Buyer Ban That Expires in 127 Days

9 min read

Ten consecutive quarters of affordability improvement. Condo prices still 6.6% lower. Starts collapsing. And the foreign buyer ban expires in 127 days. Canada's housing market is in transition, not recovery. #CanadaRealEstate #HousingMarket #ForeignBuyerBan #CrossBorderInvesting

Abhii DabasByAbhii Dabas

In short

Canada's housing market is in measured recovery: resales up 7.9% in 2026 but still below pre-pandemic averages, condo prices down 6.6%, and the Bank of Canada holding at 2.75% with no further cuts expected. Vancouver affordability improved dramatically from its 2023 peak but remains at a price-to-income ratio of 14.2. The foreign buyer ban expires January 1, 2027, with the Carney government signalling a new framework rather than a straight extension. Falling starts today are building the supply gap that will tighten the rental market from 2028.

Key takeaways

  • National home resales are projected to rebound 7.9% in 2026 to 504,100 units — still below the 511,000 pre-pandemic five-year average, reflecting a floor rather than a resumption of the prior cycle.
  • The Bank of Canada is holding its policy rate at 2.75% through 2026, with no further cuts expected, meaning the affordability tailwind from monetary easing has already been absorbed.
  • Vancouver mortgage costs as a percentage of income fell to 79.4% in Q2 2026, down from a record 105.1% in Q4 2023 — a dramatic improvement that still leaves the city among the least affordable in the English-speaking world.
  • Vancouver housing starts fell 42% year-over-year and Toronto starts fell 10%, creating a supply gap that will compress rental vacancies and support rental yields for investors once the foreign buyer ban expires.
  • The foreign buyer ban expires January 1, 2027, and the Carney government is considering a new framework rather than a straight extension — opening a policy window that global investors are watching closely.

Introduction

Canada's housing market entered 2026 in a state of measured, regionally uneven recovery. The Bank of Canada delivered its cuts and is now holding at 2.75%. Affordability has improved for ten consecutive quarters — a record streak — yet Vancouver and Toronto remain structurally unaffordable, with price-to-income ratios that make Singapore look attainable. National home resales are projected to reach 504,100 units this year, a 7.9% rebound, but still short of the pre-pandemic five-year average of 511,000. The story is not one of recovery returning to boom, but of a market finding its floor under very specific conditions: a foreign buyer ban that expires in 2027, a government that has not decided what replaces it, and a supply shock in the two cities where global investors have historically concentrated.

The Market Today: A Qualified Recovery

A Recovery That Is Measured, Not Exuberant. Home resales are projected to reach 504,100 units in 2026, a 7.9% rebound from a suppressed 2025. That sounds encouraging until placed in context: the figure remains below the pre-pandemic five-year average of 511,000 and reflects a market finding its floor rather than resuming its prior trajectory. The national composite price index is expected to decline 0.7% this year. Condo prices fell 6.6% year-over-year to $464,900 nationally (May 2026), while detached homes managed a 0.3% gain to $744,100. The divergence between property types matters: condos, which had been the entry-point investment vehicle for many buyers in Toronto and Vancouver, are under the greatest pressure.
Affordability Improved Dramatically — and Is Still Not Enough. Ten consecutive quarterly improvements in affordability represent the longest such streak on record. Vancouver's mortgage payment as a percentage of income fell to 79.4% in Q2 2026, down 25.6 percentage points from the Q4 2023 record of 105.1%. Toronto improved to 68.3% on the same measure. Yet both remain grotesquely unaffordable by any sustainable standard. Vancouver's price-to-income ratio stands at 14.2; Toronto's at 12.2. The internationally accepted threshold for a healthy, functional housing market is 3.0 to 4.0. These cities are not close. The improvement reflects how extreme the peak was, not that the market has normalised.
The Bank of Canada Is Done Cutting. After one of the most aggressive rate-cutting cycles in its history, the Bank of Canada is now holding its policy rate at 2.75% through 2026. There is no credible case for further easing: unemployment peaked at 7.1% in late 2025 and has begun easing, and longer-term bond yields are drifting higher as markets price out additional cuts. Buyers who delayed purchases in anticipation of further reductions will find they have largely missed the monetary stimulus. The affordability improvement baked in by the rate cycle is already reflected in prices and purchasing power.

Regional Divergence: Two Very Different Canadian Markets

Toronto and Vancouver: The Laggards. Ontario and British Columbia face the steepest price declines in 2026, driven by high inventory and intense seller competition. Vancouver housing starts collapsed 42% year-over-year and Toronto starts fell 10%, but the near-term effect on prices is perverse: falling starts reduce future supply while current inventory remains elevated, depressing prices now while tightening conditions later. The condo segment in both cities is particularly weak, with completed and unabsorbed units creating a buyer's market that is expected to persist through at least mid-2027. For investors, the calculus is not today's price but what supply constraints do to rental dynamics in 2028 and beyond.
The Prairies, Quebec, and Atlantic Canada: A Different Story. While Ontario and BC dominate headlines, the rest of Canada is experiencing a materially different market. Prairie provinces — Alberta, Saskatchewan, Manitoba — along with Quebec and Atlantic Canada are posting modest price gains in broadly balanced conditions. Calgary, which became a relief valve for buyers priced out of Vancouver and Toronto during the pandemic, maintained strong demand through 2025 and into 2026, with rental vacancy at 5% — higher than the coastal cities but reflecting healthy absorption of the supply built during the boom years. For cross-border investors, these markets offer accessible entry prices and more predictable fundamentals than the headline metros.
Rental Vacancy: A Hidden Opportunity. Vancouver's purpose-built rental vacancy rate reached 3.7% in 2026 — the highest level since 1988. This is a rare moment of negotiating power for renters, but the structural story runs the other way: collapsing starts mean the supply being added today is not close to meeting long-term demand from population growth, even at reduced immigration targets. Toronto vacancy stands at 3.0%, Montreal at 2.9%. Rental investors who can navigate the foreign buyer restriction — through corporate structures, multi-family above four units, or waiting for the 2027 policy change — are entering a market where the supply pipeline is emptying.

The Foreign Buyer Ban: 2027 and Beyond

The Ban: Limited Effect, Politically Durable. Canada's Prohibition on the Purchase of Residential Property by Non-Canadians has been extended to January 1, 2027. Academic evidence consistently shows the ban had minimal impact on prices — foreign buyers represented just 1.1% of BC home sales in 2021, a period when average prices still rose more than 20%. The ban is better understood as a political signal than an economic intervention. Its successor is now in active deliberation: the Carney government has indicated it will consider a new framework rather than a straight extension, opening the possibility of investment-linked exemptions, thresholds by property type, or a return to the pre-2022 rules with additional transparency requirements.
Immigration: The Long-Term Demand Engine. Canada reduced its immigration targets for 2025-2026 in response to housing affordability concerns, but the structural demand driver remains intact. Canada's population grew faster than housing supply throughout the 2010s and 2020s, and even a moderated immigration program adds substantial annual demand, particularly in the rental market. For investors with a five-to-seven year horizon, the combination of falling starts today and population growth tomorrow creates a predictable supply-demand squeeze. The reduced targets are a near-term demand dampener, not a structural reversal.
What Happens in 2027. The expiry of the foreign buyer ban on January 1, 2027 is the single most significant policy event for international real estate investors watching Canada. The Carney government has signalled it will not simply renew the existing prohibition — it will design something new. The possibilities range from a property-value threshold (permitting foreign buyers above, say, CAD $2 million) to investment-visa linkage similar to the New Zealand model, to sector-based exemptions for purpose-built rental. Each scenario implies different entry points and asset classes for cross-border buyers positioning ahead of the change.

Risks and Contrarian Cautions

The Case Against: Affordability Is Still Broken. No serious analysis can call Vancouver or Toronto affordable. A price-to-income ratio of 14.2 and 12.2 respectively means that even sustained income growth at 3% annually would take decades to reach historical norms without significant price declines. The labour market is recovering from a 7.1% unemployment peak, consumer confidence remains fragile, and reduced immigration targets dampen near-term demand. Buying into the two most expensive markets in Canada today requires a thesis about long-term structural scarcity that ignores very real short-term headwinds.
The Condo Overhang Is Real. Completed and unabsorbed condo inventory in Toronto and Vancouver represents a genuine risk for investors in the sub-$600,000 segment. Condo prices fell 6.6% year-over-year nationally, and the segment most exposed — small investor-held units in urban towers — faces both price compression and rising carrying costs from higher strata fees and maintenance on aging stock. Investors holding multiple small condos bought at 2021-2022 peak pricing are underwater in many cases, and distressed sales are beginning to appear. This creates entry opportunities for buyers with patient capital, but also signals that the sector has not yet cleared.

Investment Positioning: How to Approach Canada Now

Wait on Foreign Residential, Position in Multi-Family. The most rational posture for international investors ahead of the 2027 policy change is to avoid the ban entirely by targeting multi-family residential (four or more units) or commercial property, where the prohibition does not apply. Purpose-built rental in secondary cities — Edmonton, Calgary, Quebec City, Halifax — offers yields in the 4-6% range on assets that will benefit from both the approaching 2027 policy reset and structural supply undersupply. Ontario and BC presale markets represent a speculative position that depends on policy change more than fundamentals.
The 2027 Play: Monitor Policy, Move Fast. Cross-border buyers who want exposure to Canada's top-tier residential markets should be building relationships with brokers and lawyers now, so they are positioned to move within the first weeks of any policy change announcement. Policy transitions in real estate tend to produce a short window of irrational pricing before market participants reprice fully. The 2027 change — whatever form it takes — will likely produce exactly that window in the luxury and new-build segments of Toronto and Vancouver.
Secondary Cities Offer Fundamentals Without the Policy Risk. Calgary, Edmonton, and Halifax offer housing markets with rational price-to-income ratios (3.5 to 5.5), positive net migration, and no material condo overhang. These markets are accessible to some foreign buyers under existing rural or sub-CMA exemptions, and they are likely to be among the first segments opened under any successor policy. For investors who want Canadian real estate exposure without waiting for 2027, secondary cities are where the fundamentals are cleanest.

Frequently asked questions

Can foreigners currently buy residential property in Canada?
Canada's Prohibition on the Purchase of Residential Property by Non-Canadians Act remains in force until January 1, 2027. The ban applies to residential properties with three or fewer units in Census Metropolitan Areas and Census Agglomerations. Foreigners can still purchase commercial property, multi-family buildings with four or more units, and residential property in rural or smaller communities outside designated CMAs.
Where are Canadian interest rates headed?
The Bank of Canada held its policy rate at 2.75% through 2026 after an aggressive cutting cycle in 2024-2025. Further easing is not expected; longer-term bond yields are drifting higher. The practical effect is that the affordability improvement from rate cuts has already largely occurred — buyers who waited for additional cuts will likely be waiting indefinitely.
How has affordability changed from the 2023 peak?
Dramatically. Vancouver's mortgage payment as a percentage of income fell to 79.4% in Q2 2026, down 25.6 percentage points from the record 105.1% peak in Q4 2023. Toronto improved to 68.3%. Despite this, both cities still rank as Canada's least affordable markets, with price-to-income ratios of 14.2 and 12.2 respectively — far above the historically healthy range of 3.0 to 4.0.
What happens when the foreign buyer ban expires in 2027?
The Carney government is actively considering a new approach rather than a straight renewal of the existing prohibition. The foreign buyer ban had limited measurable impact on prices — foreign buyers represented just 1.1% of BC sales in 2021, yet average prices rose more than 20% during the ban period. The more likely successor policy involves targeted exemptions, investment categories, or a means-tested threshold rather than a blanket prohibition.
What does the supply picture look like?
Supply conditions are sharply divergent. Vancouver housing starts fell 42% year-over-year and Toronto starts declined 10%, raising concerns about future inventory. Meanwhile Vancouver's purpose-built rental vacancy rate reached 3.7% — the highest since 1988 — giving renters more negotiating power than at any point in a generation. The condo segment is worst affected: national condo prices fell 6.6% year-over-year to $464,900 in May, while detached homes edged up 0.3% to $744,100.

Sources

Author
Abhii Dabas
Abhii DabasFounder & CEO, INTRIC Global

Abhii Dabas is the Founder and CEO of INTRIC Global, the cross-border property intelligence platform for serious investors. He advises high-net-worth buyers on international real estate strategy and has evaluated residential markets across more than 40 countries.

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