Did the Canadian Real Estate Market Crash? The Full Story Behind the Shift

By Savie Wander, Realtor

Over the past few years, many people have asked the same question.

Did the Canadian real estate market crash?

The short answer is no. But the market did experience a sharp correction influenced by several economic and political decisions that changed the landscape quickly.

Let’s look at what actually happened.

The Peak and the Pullback

From 2020 to early 2022, Canadian home prices surged. Low interest rates, pandemic driven demand, limited inventory, and remote work flexibility pushed prices higher across the country.

Then conditions changed.

The Bank of Canada raised interest rates aggressively to fight inflation. Mortgage costs increased. Buyers qualified for less. Monthly payments rose significantly.

As demand cooled, prices adjusted.

But interest rates were not the only factor.

Policy Changes That Impacted the Market

Several government policies added pressure and uncertainty during the slowdown.

The Foreign Buyer Ban

Canada introduced a temporary foreign buyer ban aimed at reducing non resident ownership in certain markets. While foreign buyers represent a small percentage of overall transactions nationally, the policy affected investor sentiment, particularly in major cities like Toronto and Vancouver.

Any time policy targets real estate directly, it creates hesitation in the market.

Capital Gains Tax Changes

The federal government announced a temporary increase in the capital gains inclusion rate for certain thresholds. This created concern among investors, small business owners, and property holders. Even if it did not impact every homeowner, it added another layer of uncertainty around long term investment planning.

Real estate is heavily tied to tax policy. When tax rules shift, investor confidence often pulls back.

Political Uncertainty and Snap Election Speculation

Periods of political uncertainty tend to slow real estate activity. Talk of snap elections, shifting federal leadership dynamics, and evolving policy priorities made some buyers and investors cautious.

Markets do not like uncertainty. When households are unsure about the direction of fiscal or housing policy, many choose to wait.

Trade Tensions and Tariff Concerns

Concerns about potential U.S. tariffs, particularly under renewed trade tensions involving Donald Trump, also contributed to economic uncertainty. Trade instability affects employment outlooks, business investment, and overall consumer confidence.

When confidence dips, housing activity often follows.

Immigration and Work Permit Refusals

Canada’s housing market has long been supported by strong immigration targets. However, in recent years there have been increased refusals and delays in work permits and temporary resident approvals.

Some newcomers returned to their home countries after permits were not renewed. That shift reduced short term rental demand in certain markets and impacted investor owned condo segments in major cities.

Population growth remains strong overall, but short term immigration fluctuations did affect demand in specific areas.

Was It a Crash or a Correction?

A true housing crash typically involves widespread foreclosures, forced selling, and long lasting price collapses.

That did not happen in Canada.

Instead, we saw:

• Rapid interest rate driven demand reduction
• Price corrections from unsustainable pandemic highs
• Slower sales volumes
• Increased buyer caution

Canada’s mortgage stress test rules meant most borrowers were already qualified at higher rates. That prevented large scale distressed selling.

The system bent, but it did not break.

What the Canadian Housing Market Looks Like Now

Today’s market is more balanced.

Buyers are more selective. Sellers need to price realistically. Investors are more analytical. The frenzy is gone, but the fundamentals remain.

Canada continues to face long term housing supply constraints, especially in major urban centers. Population growth still supports demand over time. Land availability remains limited in cities like Toronto.

Markets move in cycles. Rapid growth is often followed by correction. Correction is followed by stabilization.

What This Means for You

If you are buying, you may find more negotiation power and less competition compared to peak years.

If you are selling, preparation and pricing strategy are critical. The market rewards homes that clearly show value.

National headlines can sound dramatic. But real estate is hyper local. What is happening in one province or city does not always reflect conditions in another.

The key is understanding your specific market.

I am Savie Wander, and I help clients navigate these shifts with clear strategy and practical advice. If you want to understand how today’s Canadian real estate market impacts your buying or selling plans, let’s have a conversation.