Canada’s Housing Market Heats Up: What Buyers and Sellers Should Expect

The Canadian housing market showed signs of renewed activity in July, with national home sales climbing 3.8% from the previous month. This marks the fourth consecutive monthly increase, suggesting that momentum is building after a slower start to the year.

More listings are expected to come onto the market in the fall, but experts warn that demand could soon outpace supply, potentially pushing the market back toward a seller’s advantage by next year. Prices have been rising slowly but remain stable on a national level. That stability may not last long, as tighter market conditions could drive gains as early as this fall.

For much of the past two years, interest rates dominated the housing story. The Bank of Canada raised borrowing costs aggressively beginning in 2022 to cool inflation, including housing prices. Now, rates have settled into what is described as a “neutral” zone, high enough to contain inflation but not restrictive enough to stall growth.

This has opened the door for more buyers to qualify for mortgages, leading to a rebound in sales. Earlier uncertainty, including global trade tensions, had caused some buyers to delay major purchases. With those fears easing, more Canadians are moving forward with homebuying plans.

In July, new listings barely changed, increasing by just 0.1% from June. Seasonal patterns, however, suggest more homes will hit the market in the coming months. Even so, supply remains a long-term concern.

National home prices were relatively unchanged from June and are down 3.4% compared with last year. But with demand expected to grow, pressure on prices could return unless supply improves significantly.

The federal government has announced an ambitious plan to build nearly half a million homes annually over the next decade. While this could help address supply shortages in the long run, high construction costs and limited incentives for mid-sized housing developments remain challenges. Currently, most new builds are small apartments, with fewer single-family homes and almost no “missing middle” housing like townhomes.

For now, Canada’s housing market looks balanced heading into the fall, providing opportunities for buyers. But if demand accelerates and supply fails to keep up, conditions could quickly shift toward sellers next year. Long-term solutions will hinge on government efforts to expand housing supply and ensure a wider mix of home types.