Real estate in Canada is expensive largely because more people want homes than there are houses available, but there is a number of other factors.
For the past ten years or so, I've been keeping a close eye on what's going on in Canada’s real estate market.
In this guide, I'll break down how housing prices got so high, what the market looks like right now, and what you should know before buying in 2026.
Quick Summary
- The average Canadian family is now spending about 63.5% of their pre-tax income on housing, according to RBC [1].
- Prices are highest in big cities like Toronto and Vancouver. In smaller cities like Regina, the average home price is much lower, around $340,183 as of March 2026 [2].
- More people moving to Canada, investors buying homes to make money, people buying homes hoping prices will go up, and low interest rates all made the already limited housing market even tighter.
Why Is Canadian Real Estate So Expensive?
The Canadian real estate is so expensive due to seven main reasons.
1. A Chronic Housing Supply Shortage
Canada’s main problem is that there just aren’t enough homes to meet the demand. The Canada Mortgage and Housing Corporation (CMHC) says we need about 5.8 million new homes by 2030 to make housing more affordable [3].
Since 2015, Canada hasn’t built enough homes to meet demand. Even with record new projects from 2021 to 2023, supply still falls short, keeping rents high in expensive cities.
Back in 1995, the Canadian federal government stopped building new social housing. This means fewer affordable homes have been added over the years, making it harder for people with lower incomes to find a place to live.
2. Zoning Rules That Block Density
Zoning laws and land use restrictions block the kind of housing many Canadians need. Single-family zoning dominates land in Toronto and Vancouver, preventing “missing middle” construction such as townhouses, low-rise apartments, and family-sized condo units.
Government policies, including land-use restrictions and zoning laws, significantly impact the housing market by limiting land for new housing projects, raising building costs, and delaying new housing units.
These rules push projects to the urban edge, away from jobs, transit, schools, and communities where demand is strongest.
3. Development Delays and Fees
The supply of new housing inventory is frequently throttled by slow municipal approval processes and strict zoning limits.
In Ontario, approval timelines average roughly 18 to 24 months, and municipal development charges can add from $40,000 to over $180,000 to the cost of each new home depending on the city [4]. Those costs flow into sale prices, rent, and pre-construction pricing.
Smaller developers are often priced out of major cities, while larger builders delay or cancel projects when fees, interest rates, land costs, and construction uncertainty make new units financially impossible.
4. Population Growth Outpacing Construction
Canada experiences significant population growth driven by immigration. Between 2014 and 2023, Canada admitted about 2.98 million permanent residents, plus roughly 4.4 million study and work permit holders.
As of 2022, Canada's population reached over 39 million, with the majority living in urban areas [5]. Vancouver, Toronto, and Montreal received a disproportionate share of Canada’s population increase, creating high demand and limited supply.
Government research attributes about 11% of house price increases nationally to immigration, with stronger effects in the 53 largest municipalities where over 80% of newcomers settle [6].
5. Low Interest Rates Supercharged Borrowing
Low interest rates made mortgages easier to access and increased demand for housing, especially in big cities.
From the 2008 financial crisis through the pandemic, low borrowing costs allowed Canadians and corporate investors to borrow more, bid higher, and push home prices upward. Cheap credit also made property more attractive than other investment assets.
A 2024 report indicated that 23% of Canadians would be ready to buy a home if Bank of Canada rates fell another 0.5% to 1%, which could add upward pressure to Canadian real estate prices.
6. Investor and Speculator Activity
Investors accounted for 30% of home purchases in Canada during the first quarter of 2023, up from 28% in 2022 and 22% in 2020, showing a growing trend of speculative investments [7].
The Bank of Canada reported that investors accounted for 30% of home purchases in the first quarter of 2023, indicating investment-driven demand. First-time buyers’ share has declined as investors took more market share.
Speculative buying for future appreciation has raised prices and reduced long-term rental availability in major Canadian cities. Investor market share includes nearly half of the condominium market in some areas.
7. Foreign Buyer Demand
Foreign investment has significantly influenced housing prices in Canada, especially in Vancouver and Toronto, where foreign buyers were active participants.
The influx of foreign investment, particularly from countries like China, has been cited as a key factor driving up housing prices in Canadian urban centers. Before the ban, foreign buyers represented roughly 3% of homeownership nationally, but their impact was concentrated in certain segments.
The Prohibition on the Purchase of Residential Property by Non-Canadians Act began January 1, 2023 [8]. Various jurisdictions have also introduced legislation to neutralize speculative investments, though affordability gains have been limited.
How Canadian Real Estate Prices Increased
Canadian real estate prices rose over nearly two decades because demand kept compounding while supply stayed limited. The average home price in Canada increased from $241,000 in January 2005 to $719,400 in February 2024, highlighting the major rise in housing costs.
Through the 2010s, low interest rates, population growth, immigration, urbanization, and home ownership demand pushed prices upward.
In major urban centers like Toronto and Vancouver, housing prices outpaced wage growth for many years, creating a deep affordability crisis for local residents, young people, and many Canadians trying to purchase their first property.
Urbanization was a major factor. More people moved to cities for better jobs, higher income potential, transit access, education, factories, services, and broader economic possibilities. That concentration created a housing shortage in places where construction could not expand quickly.
The pandemic then accelerated everything. Rate cuts made mortgages cheaper, remote work changed housing preferences, and buyers searched for more space.
From 2020 to 2022, price increases were dramatic, and RBC’s affordability measure hit an all-time worst of 63.5% in 2023.
After 2022, the Bank of Canada raised interest rates aggressively. That cooled the market and reduced some bidding power, but it did not restore affordability. The 41% affordability reading of 2015 - already considered stressful at the time - now looks like a distant baseline.
Existing homeowners or investors using equity to buy additional properties still compete with first-time buyers, increasing bidding pressure when supply is tight.
Current Canadian Real Estate Prices
The national average home price was $673,084 in March 2026, down 0.8% year-over-year from $678,668 in March 2025. RBC’s affordability measure improved to 52.4% of household income in Q4 2025, but that still leaves unaffordable housing conditions across much of the country.
Ontario and BC have recently seen price declines, while Alberta, Quebec, and Atlantic Canada have posted gains. This reflects affordability-driven migration from expensive major cities toward smaller cities, Calgary, Halifax, rural areas, and lower-cost regions.
| Market | Current signal |
|---|---|
| Canada average home price, March 2026 | $673,084 |
| Canada average home price, March 2025 | $678,668 |
| RBC affordability measure, Q4 2025 | 52.4% of household income |
| Toronto detached homes | Above $1 million |
| Vancouver detached homes | Above $1 million |
| Regina average home price | About $313,400 |
A considerable portion of the market is driven by buyers using existing home equity to purchase more property. That benefits owners with money and market power, but it limits access for first-time buyers and renters.
Future Projections on Real Estate in Canada
CMHC's Housing Market Outlook points to gradual moderation nationally, not a sharp crash or a strong rebound [9]. The structural supply deficit makes a major price collapse unlikely because the country simply does not have enough homes to support sustained broad-based declines.
Affordability should improve slowly if interest rates continue easing, but lower mortgage rates can also bring potential buyers back into the market. That means rate relief may reduce monthly cost while also lifting demand.
The 5.8-million-unit gap means prices are unlikely to return to pre-2020 levels in high-demand cities such as Toronto and Vancouver. Interprovincial migration toward more affordable markets, including Calgary, Halifax, smaller Ontario cities, and parts of Atlantic Canada, is likely to support price growth in those regions while further cooling demand in the most expensive markets.
Of course, supply matters by region. New units built far from jobs and transit will not solve the same problem as new homes in central communities.
FAQs
Is Canadian Real Estate Overvalued?
Yes, the Canadian real estate is overvalued relative to incomes. Housing in cities like Toronto and Vancouver remains very expensive, making it hard for most people to afford a home even after recent price drops.
Will Canadian Real Estate Prices Drop Significantly?
The Canadian real estate prices are unlikely to drop significantly because supply remains limited. CMHC expects housing prices to ease slowly, not crash. Prices may fall more in Toronto and Vancouver, but nationwide drops are unlikely due to slow building, population growth, and limited homes.
Why are Toronto and Vancouver So Much More Rxpensive Than the Rest of Canada?
Toronto and Vancouver are so much more expensive than the rest of Canada because these cities attract people, capital, and businesses, but new housing supply is difficult to add quickly.
Does Immigration Cause High Housing Prices in Canada?
Immigration contributes to higher housing prices in Canada, but it is not the only cause. Immigration causes about 11% of price increases. The main causes are limited supply, low rates, investors, zoning, and speculation.
What is Canada doing to fix the housing crisis?
To fix the housing crisis, Canada has put in place rules to limit foreign buyers, allow more housing types in neighborhoods, speed up approval processes, and offer savings plans like the FHSA. These steps help, but we still need to build 5.8 million new homes by 2030 to make housing affordable again.
Conclusion
2026 is better than the 2023 peak, but housing is still expensive. Prices have dropped a bit and interest rates are lower than before, so there’s less competition for buyers compared to the pandemic years.
However, housing costs still take up a big chunk of income - over half for many Canadians. If you’re thinking about buying, focus on being financially ready with a steady income, a good down payment, and affordable mortgage payments instead of trying to time the market perfectly.
Pre-construction condos are often cheaper than resale homes in Toronto and Vancouver. They let buyers lock in today’s price for a home that will be ready in the future. To compare projects, pricing, incentives, and deposit structures, explore Precondo’s latest listings and market resources.
References:
- https://www.rbc.com/en/economics/canadian-analysis/canadian-housing/housing-affordability/
- https://www.crea.ca/housing-market-stats/canadian-housing-market-stats/
- https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/housing-research/research-reports/2023/housing-shortages-canada-updating-how-much-we-need-by-2030-en.pdf
- https://www.cmhc-schl.gc.ca/observer/2025/we-built-this-city-development-charges
- https://www150.statcan.gc.ca/n1/daily-quotidien/230322/dq230322f-eng.htm
- https://www.canada.ca/en/immigration-refugees-citizenship/corporate/reports-statistics/research/immigration-housing-prices-municipalities-canada.html
- https://www.bankofcanada.ca/2022/01/staff-analytical-note-2022-1/
- https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html
- https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/market-reports/housing-market/housing-market-outlook
