Safe as Houses? How Canada’s Ailing Housing Market Could Spell Trouble for The Whole Economy
The comments below are an edited and abridged synopsis of an article by Jordan Gowling, Financial Post
Canada Housing Market Slump: Economic Risks And Investment Opportunities
Canada’s housing market is facing one of its steepest slowdowns in recent memory, reminiscent of the 2008-2009 financial crisis and the COVID-19 downturn. Holly Calderwood, a Vancouver real estate veteran, reports declining sales, falling prices, and rising foreclosures, with some homeowners losing millions. This decline is attributed to higher mortgage rates, a foreign buyer ban, and trade tensions with the US, dampening investment sentiment and housing demand.
Major cities such as Toronto, Vancouver, and Calgary are entering buyer’s markets, marking a shift from the previously overheated conditions. The Bank of Canada’s interest rate hikes since mid-2022, aimed at curbing post-pandemic inflation, have significantly impacted affordability, leaving many prospective buyers priced out. Robert Hogue of RBC forecasts a 3.5% decline in Canadian home resales in 2025, with Ontario and British Columbia experiencing the sharpest drops.
The housing slump poses broader economic concerns. Residential real estate has long been a key driver of Canada’s economy, contributing $143.4 billion and supporting 1.2 million jobs in the previous year. Housing activity stimulates consumption in sectors like renovations, appliances, and materials. Residential investment accounted for 10% of GDP during the pandemic housing boom, though it has moderated to 7.5% in 2023. Canada’s housing assets, totaling $4.2 trillion, represent 25% of national wealth. Despite falling prices, Canada remains the most expensive housing market in the G7, with high household debt and mortgage leverage creating vulnerabilities.
Condo markets in Ontario and British Columbia have been hit particularly hard, with pre-construction investors facing losses and some projects entering receivership. Toronto suburban condo prices have dropped up to 50%, while national one-bedroom rents declined 3.6% year-over-year in May 2025. The slowdown is partly driven by a cooling immigration rate and increased purpose-built rental supply, reducing rental demand and prices.
Despite these challenges, regional disparities exist. Quebec’s housing market shows gradual upward momentum, while Calgary benefits from more buyer-friendly conditions, though its peak prices have receded. The undersupply of first-time, low-rise homes in Ontario and British Columbia is pronounced, with construction of these properties collapsing over the past 16 months. Experts warn that persistent supply constraints could spark another pricing bubble when economic conditions improve.
For investors, this market correction signals an opportunity to diversify into alternative stores of value. Gold, for instance, offers a hedge against housing market volatility and broader economic uncertainty. With housing prices cooling and household debt high, gold can serve as a stable, tangible asset, preserving wealth while the housing sector adjusts.
Conclusion
Canada’s housing slowdown reflects a complex mix of affordability constraints, interest rate shifts, and market speculation. While certain regions show resilience, the overall economic impact may include reduced consumer spending, employment drag, and slower GDP growth.
NOTE FROM BMG:
Savvy investors may consider gold as a strategic complement to real estate holdings, providing balance amid the uncertainty of Canada’s property markets.
