Predictions for 2026

As we wrap up 2025, we look back on the performance of the real estate market in contrast to the expectations we had at the end of 2024, and one thing is clear - boy, were we wrong!

The start of 2025 began with optimism and the view of lower rates and improving real estate conditions. 12 months later, and the 5-year bond has jumped 30bps and now sits at the exact same yield as last year. Borrowers and prospective home buyers will need to get comfortable with mortgage rates stuck at 4%. Real estate sales volumes will finish the year somewhere around 62,000 homes sold.

This is below 2024 (68,000) and 2023 (66,000). Both these years represented multi-decade lows, and 2025 just beat that. Home prices didn’t fare any better as GTA prices fell another 1% to just below $1.1M - a mark set back in 2021.

So what can we expect for 2026? Ironically, lower rates and improving sales.

The Bank of Canada met last week and left the overnight rate unchanged. In the press conference, Tiff

Macklem stated: “If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. ”

There are two reasons to believe economic activity will not evolve broadly in line with the October projections. The Labour Force Survey (LFS), which reported strong numbers in October, lags the more accurate, albeit slower, Survey of Employment, Payrolls and Hours (SEPH). This StatsCan measure has shown a steady decline from its 2022 peak. September’s report showed a surprisingly large 58K m/m decline in headline employment, the steepest since public health lockdowns in 2021. Secondly, Canada’s GDP numbers showed unanticipated stronger positive growth in Q3. Virtually all of the increase came from an improvement in net trade, but almost all of that was from a reduction in imports rather than a substantial improvement in exports. This was due to a steep quarterly decline in machinery and equipment imports in the quarter, particularly from the oil and gas sector. We grew because we bought less, not because we produced more - this is not sustainable for long- term growth. The BoC’s hands will be tied to start the year, but we expect one or two more cuts in 2026 to reflect the slowing economy.

Our second prediction is for improving sales in the GTA. We are not expecting a return to the mean, but we don’t see sales getting any lower. Prices shifted lower in this last quarter. The sellers who needed to sell, and even some of the reluctant but exhausted gave in to the reality of the market. The sellers who lowered their prices or priced aggressively to start were able to attract buyers, setting a new benchmark for the neighbourhood or building. We remain of the view that sentiment more than affordability is what is constraining the market currently. As the economy continues to shift in 2026, we see more sellers accepting the reality, and buyers will capitalize on the chance to buy at a perceived ‘bottom’. We expect sales volumes total around 70,000 homes sold in 2026.

As we head into the new year, we would like to thank everyone who supported our business this year and followed these reports and our social platforms.

Wishing everyone a Happy Holiday and Happy New Year!