The strength of the Canadian real estate market is not just determined by the supply and demand dynamics that exist between buyers and sellers. There’s also a wider set of economic issues that influence property values, such economic growth, job security and the cost of borrowing.
New data indicates the path to recovery for the Canadian property market is finally showing signs of sustainability.
The Bank of Canada has now reduced the base overnight rate for the eighth time since May 2024. It has now halved the rate from its high of 5% to 2.5%.
There are also an increasing number of property sales being made in Vancouver, Edmonton, Calgary and Montreal, according to the latest data from the MLS Home Price Index.
So what are the key economic factors facing Canada that will influence our property market in 2026? This is a key question for anyone thinking of entering the market in the next few months.
Here’s a breakdown of the fundamental economic indicators thanks to separate analyses published in the past few weeks by the Royal Bank of Canada (RBC) and the Bank of Canada.
Inflation – Consumer prices increased by 1.9% in August, which is a great platform on which to build an economic recovery. Underlying inflation is 2.5%. Central banks around the world have a target inflation rate of between 2%-3%. The recent government move to roll back most retaliatory tariffs on US imports will ease inflationary pressures.
Fiscal packages – Federal and provincial governments now have economic support policies in place that should improve confidence moving forward.
Consumer spending – Weak confidence in the economy and personal job security is going to hold back consumer spending for the rest of the year, and perhaps into early 2026.
Immigration – Slower population growth will continue to dampen demand for housing but will ease concerns regarding the struggling labour market.
Job security – Unemployment is at 7.1% and most recent job losses have been in trade-sensitive sectors. Permanent layoffs slowed to 4.7% year-over-year in August, according to the RBC.
The tariffs – Some 88% of our exports to the US remain tariff-free. Products exported to the US that have been specifically targeted by tariffs have fallen 16%. While it’s not good news for our economy, it’s not the disaster scenario that had been feared.
Regional impacts – Some regions of Canada are hurting because of US tariffs. The doubling of tariffs on steel and aluminium, as well as levies on our lumber exports, continue to take a regional toll. There is a ripple impact to local property markets.