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FIRST READING: At least the real estate is getting affordable

For the first time in a generation, a declining economy is syncing up with declining home prices

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FIRST READING: At least the real estate is getting affordable Back to video

Canada continues to suffer measurable declines in wealth, productivity and even happiness, but recent figures do seem to show that the deflation of Canada’s world-famous real estate bubble finally appears to be at hand.

In Toronto, benchmark home prices are now hitting levels not seen since 2016.  As of the most recent figures from the Toronto Regional Real Estate Board, the benchmark price for a home in Greater Toronto is now $938,800.

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When adjusting for inflation, this marks a 10-year low. At the close of 2016, a Toronto home came in at $728,500, which works out to $950,890 in 2026 dollars.

It’s basically the same story at a national level. According to the Canadian Real Estate Association, the current benchmark price for a Canadian home is $661,300.

Adjusting for inflation, this puts Canadian homes at a price not seen since the summer of 2016. In August of that year, home prices hit $493,400 ($652,752 in 2026 dollars).

Canadian home prices have been in steady decline for at least the last four years, mostly as a result of the absolutely dizzying real estate inflation brought about as a result of the COVID-19 pandemic.

COVID-19 lockdowns and compensation packages flooded the economy with excess cash, and also sealed off the usual outlets for consumer spending, such as travel.

As a result, Canadians poured billions into the real estate sector, causing price surges even in rural areas that had previously been relatively shielded from the real estate bubbles of Toronto or Vancouver.

The cottage country centre of Muskoka, Ont., for instance, saw real estate values surge by one fifth in just 2021.

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Muskoka prices – as in the rest of Canada – have subsequently cooled down from the frenzy of 2021. But what’s happening now is that home prices are starting to dip below even their pre-COVID highs, and to chip away at an unaffordability crisis that was already among the world’s worst in early 2020.

For at least a decade, the Canadian real estate market has consistently stood out as the one country where real estate prices were most detached from local incomes.

The OECD maintains a regularly updated “price to income” index weighing home prices against the public’s ability to pay them. As per the index’s most recent tally, which employs 2025 numbers, Canada remains in first place; a ranking it has maintained for much of the last 10 years.

During that time, Canada’s only real challenger for the title of “most unaffordable” has been Portugal. Driven in part by the widespread conversion of Portuguese homes into tourist rentals, an October report by the European Commission estimated that Portuguese real estate was overvalued “by around 35” per cent.

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Canada’s journey to unaffordability first took hold in the early 2000s, when house prices first became detached from Canadian incomes.

In a phenomenon best identified by economist David Doyle in 2021, it was in the early 2000s that measures of Canadian home prices first began to deviate from measures of “real disposable income.”

Ever since the 1970s, the two numbers had risen or fallen together based on economic conditions. But the story of Canada’s 21st century real estate market is that house prices have consistently surged regardless of whether the Canadian population was getting poorer or richer.

However, if current trends continue, Canadian real estate may return to a pre-bubble reality in which a depressed Canadian economy also means a depressed Canadian real estate market.

A recent analysis by BMO economist Robert Kavcic forecasts that, for the foreseeable future at least, the price declines will continue.

“Bigger picture, the market continues its long and slow downturn,” wrote Kavcic.

In comments published in Better Dwelling, Kavcic added “we don’t expect this downward momentum in real home prices to turn around soon.”

Air Canada just suffered its first fatal incident in 43 years. On Sunday night, an Air Canada flight taxing on the tarmac at New York’s Laguardia Airport collided with an airport fire truck. Both pilots were killed, and multiple passengers injured, including a flight attendant thrown clear of the aircraft while still strapped to her seat.

It was the first time since 1983 that lives had been lost as a result of an incident aboard an Air Canada flight. The last time was also at a U.S. airport, and it was an on-the-ground fire that killed 23 passengers, including Canadian folk singer Stan Rogers.

There are several political angles to the tragedy. The most notable of which is that the collision seems to be a failure of air traffic control, and U.S. air traffic control has been chronically understaffed for years. As recently as 2023, a U.S. Department of Transportation report noted that, of 26 “critical” air traffic control facilities in the U.S., 20 of them were understaffed.

A U.S. Democratic congressman, Lloyd Doggett, raised this point in a Tuesday statement where he called the Air Canada tragedy “a grim warning regarding the dangers of an understaffed air traffic control tower.”

But among Canadian lawmakers, the most immediate lesson from the Air Canada tragedy has been somewhat different.

The chief reaction of parliamentarians to the incident is that Air Canada CEO Michael Rousseau may have violated the Official Languages Acts in issuing his official condolences. Specifically, the House of Commons’ Committee on Official Languages expressed outrage that in a video message to the families of the late pilots, Rousseau spoke in English with French subtitles.

The video sparked a wave of complaints to the Commissioner of Official Languages, and the languages committee voted this week to summon Rousseau to Ottawa to answer for what they said were actions “incompatible with the obligations set out in the Official Languages Act and the expectations of the Canadian public.”

And that’s not enough for Quebec’s Minister of Justice, Simon Jolie-Barrette, who thinks Rousseau should be fired. “I think if he doesn’t speak French, he should resign,” said Jolie-Barrette on Wednesday.

Prime Minister Mark Carney, meanwhile, told a press scrum that Rousseau lacks “compassion.”

“We proudly live in a bilingual country, and companies like Air Canada, particularly, have a responsibility to always communicate in both official languages regardless of the situation. I’m very disappointed as others are, rightly so,” said Carney.

The comment was notably delivered in English, and Carney didn’t repeat it in French.

First Reading is a Canadian politics newsletter curated by the National Post’s own Tristin Hopper. To get an early version sent directly to your inbox, sign up here.

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