Market Report (Source TRREB)
The Bank of Canada left interest rates unchanged in December, signaling a “wait and see” approach. They emphasized that future decisions will depend on incoming data. While rates may remain steady for some time, there is a possibility of increases if inflationary pressures persist.
Scotiabank has suggested that higher rates could be needed by late 2026, driven by inflation and government spending. For now, the Bank of Canada is monitoring how increased government spending impacts the economy.
The real estate market is showing signs of renewed activity, and I anticipate stronger momentum in 2026. With Canadian Mortgage Trends* reporting possible interest rate increases in late 2026, many buyers currently on the sidelines may choose to enter the market earlier to secure favourable rates.
The first half of 2026 is likely to outperform 2025, though conditions will remain measured given ongoing layoffs, trade tensions, slower population growth, and elevated inflation. 2026 markets will not go crazy like in 2022. People will not be willing to excessively overbid because they know rates will likely be higher in the future.
Uncertainty continues to cloud the outlook. Ongoing tariff disputes and trade tensions have strained Canada’s relationship with the United States, and recent developments suggest this disruption may deepen under the current administration. Combined with recent layoffs, many prospective buyers remain cautious, opting to wait for greater economic stability.
Immigration policy changes have added another layer of complexity. The federal government’s efforts to slow immigration aim to give Canada time to catch up on housing and infrastructure development, but the impact on demand remains to be seen.
On a more optimistic note, Canada is actively pursuing new international partnerships to diversify trade. With abundant natural resources and access to clean, affordable energy, the country is well-positioned to expand its global footprint.
Segmented Market Outlook
The housing market is currently divided into two distinct segments: condos and freeholds. Condos continue to face headwinds, particularly newer units that are often too small to meet the needs of young families.
Freehold properties are expected to perform more steadily, though most will sell at pre-negotiated prices—often below asking.
As stated earlier, there might be increased buying activity due to anticipated rate hikes later next year. The possibility of increased rates remains to be seen. The bank of Canada will wait until more current data is analyzed before making its decision. The current market presents a unique opportunity for both buyers and sellers. For first-time buyers, particularly in the condo segment, affordability has improved significantly—making homeownership more accessible than it has been in years. Condos remain a popular entry point due to their lower price point compared to freehold properties.
Sellers also stand to benefit: upsizing to a larger home has become more attainable, with reduced competition and more favourable conditions when submitting offers on their next property.
www.canadianmortgagetrends.com
www.truenorthmortgage.com
From Truenorthmortgage.com
“Recent market-based forecasts expect the BoC rate to remain at 2.25% into early 2026, then rise to 2.50% by the end of 2026 and again to 2.75% in 2027″.
