In a climate of falling interest rates it was hoped that Canada’s housing market would rebound in 2025, but activity was tepid, says National Bank Financial Inc. (NBF). However, it expects the market to perk up this year, as affordability continues to improve.
In a report released this week, NBF economists noted that housing market transactions declined by 1.9% last year, and in December, transactions were down by 2.7% on a month-over-month basis. New listings were also down by 2% last month, and active listings ticked down too.
The decline in activity came against the backdrop of easing borrowing costs, which some market watchers expected to stimulate sales during the year.
“However, national data did not tell the whole story, as different regional markets evolved in very different ways in response to increased trade uncertainty and significant demographic shifts,” the report said.
For instance, home resales declined in Ontario, British Columbia, and Alberta last year, it noted, but resale activity picked up in other parts of the country — particularly in Quebec, Saskatchewan, and Manitoba, along with most of the Atlantic provinces, where sales were buoyed by improved affordability conditions.
Yet, Ontario, B.C. and Alberta were hampered by slowing population growth as a result of changing federal immigration policy, and Ontario and B.C. continued to struggle with affordability, despite the declining interest rates.
“Looking ahead, we believe that the residential market should regain some momentum in 2026,” NBF said, “supported by improved affordability conditions in recent quarters, the cumulative decline in the Bank of Canada’s policy rate, and an improving labour market.”
However, the report noted that ongoing uncertainty — both economic and geopolitical — poses risks to the outlook. The persistent federal efforts to reduce immigration will also “continue to be a headwind for at least the next two years,” it said.
Additionally, the report noted that housing starts were strong in December, primarily driven by an increase in construction in Ontario. And, for the full year, starts were up 5.6% to the third-highest total on record.
This increased construction also came amid some major shifts in the sector, as the report noted that for the first time ever, more than half of the new construction in 2025 (50.6%) was for rental units, with just 27.1% aimed at homebuyers and the other 22.2% devoted to condos.
“These structural changes are the result of several significant trends, such as the need for densification, affordability challenges, and low rental vacancy rates in recent years,” the report said.
In 2026, housing start activity could “remain resilient,” NBF said — bolstered by declining interest rates and ongoing supply shortages.
“However, population decline and rising vacancy rates in the rental sector are likely to represent headwinds that could slow new construction later this year and in 2027,” it added.