TD lowers 2026 housing forecast, warning of steeper declines in Ontario and B.C.

  3/27/2026 |   SHARE
Posted in Canadian Housing Market by Vanguard Realty | Back to Main Blog Page

TD Economics has sharply downgraded its outlook for Canada’s housing market, no longer expecting growth in home sales or prices this year after a weak start to 2026.

According to reporting by CTV News, TD now forecasts national home sales will decline 1.8% year over year in 2026, with average home prices slipping 0.3%. That marks a significant reversal from its December outlook, which projected a 9.3% increase in sales and a 4.1% rise in prices.

Economist Rishi Sondhi said housing activity is expected to spend much of the year recovering losses from the first quarter, as a sluggish economy, elevated uncertainty, and persistent cost-of-living pressures continue to restrain demand.

TD attributed the downgrade primarily to weaker-than-expected housing activity in late 2025 and the opening months of 2026. Severe weather disrupted markets across Central and Atlantic Canada early in the year, while British Columbia also recorded softness despite milder conditions.

Interest rates are expected to play a relatively neutral role in the revised forecast. TD anticipates that the Bank of Canada will hold rates steady through 2026, with limited movement in bond yields that influence fixed mortgage rates.

Ontario and B.C. bear the brunt

The most significant downward revisions were concentrated in Ontario and British Columbia.

TD previously projected home sales would rise 13% in Ontario and 15.1% in B.C. The updated outlook now calls for Ontario sales to fall 3.2%, while activity in B.C. is expected to decline slightly by 0.2%.

Price forecasts were also revised lower. Ontario home prices are now expected to drop 4% in 2026, reversing an earlier projection for a 0.6% gain. In B.C., prices are forecast to fall 1.2%, compared with the previously expected 3.6% increase.

TD said these provinces recorded the steepest first-quarter declines, with affordability challenges and expectations of further price drops keeping many buyers on the sidelines. Pent-up demand has not returned as quickly as anticipated, suggesting additional price declines may be needed before activity strengthens.

Within Ontario, the report identified the Greater Toronto Area condo segment as the weakest in the country, citing elevated inventory levels that must be absorbed before prices can stabilize.

Demographics reshape demand

Population trends are also influencing housing dynamics.

TD reported that Canada’s population declined last year for the first time since Confederation, driven largely by losses in Ontario and British Columbia. The decline contributed to softer rental demand and falling rents, reducing investor interest in those markets.

By contrast, Alberta continues to stand out, with the strongest population growth in the country supported by immigration and interprovincial migration, both of which are helping sustain housing demand.

External risks remain

Geopolitical developments could alter the outlook.

Sondhi noted that a broader or prolonged escalation of tensions in the Middle East could strengthen housing demand in oil-producing regions while weighing more heavily on oil-importing provinces. Such conditions could also trigger pent-up demand in Ontario and B.C. more quickly than expected.

He also highlighted upcoming negotiations tied to the CUSMA as a key uncertainty for the broader economy and housing market.

Recovery expected beyond 2026

Despite the near-term weakness, TD maintains a more optimistic medium-term view.

The report expects improved economic and labour market conditions in 2027, along with reduced uncertainty and improved affordability following price declines in Ontario and B.C., to support a recovery in housing activity.

TD now forecasts national home sales will rise 9.6% year over year in 2027, with average home prices increasing 2.7%.

Source/More Info: Wealth Professional

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