April 20, 2026 | Birthed in a Bull Market

Happy Monday Morning!

If you thought last year was a tough year for the Canadian housing market, 2026 is shaping up to be even worse. Per CREA, national home sales slowed to a trickle in Q1, with the weakest start to the year since 2009. As my friend Ben Rabidoux with Edge Analytics notes, if you strip out the global financial crisis, this was the slowest Q1 in 25 years. Ouch.

As sales and liquidity dry up, home prices continue to fall, dropping 0.4% month-over-month in March, and down 4.7% on an annual basis. National home prices have fallen 21% from the peak, the sharpest correction dating back to the 1980’s.

Buyers are sitting on the sidelines with no urgency to pull the trigger, and they’re getting rewarded for that behaviour in the form of lower prices. Investors, meanwhile, are nowhere to be found.

As we’ve highlighted at length in this newsletter, the dearth of investors has major ramifications for the pre-sale housing market.

According to data from Urbanation, sales declined to a new 35-year low. In Q1-2026, 246 new condominiums were sold in the Greater Toronto Hamilton Area (GTHA), down 52% annually and 94% below the 10-year average. For the first time in at least 30 years, there were no new project launches during the quarter!

If you can’t sell what you already have, why launch a new project?

More from Urbanation:

A record-high 4,295 new condos were completed and unsold as of Q1, more than doubling the level from a year ago and nearly five times higher than two years ago. Based on sales during the previous 12 months, there was 92 months of completed new condo supply on the market, which doesn’t fully account for units that were presold but the buyer failed to close. Additionally, 8,629 unsold new condos were under construction and slated for completion in the next couple years.

Developers lowered asking prices for standing inventory to an average of $1,189 per square foot (psf) in Q1, a 5% decline from a year ago and a 13% decrease from the high three years ago. However, resale units in comparable buildings registered within the past three years averaged a selling price of $859 psf in Q1-2026, a 25% drop from the market peak in Q1-2022.

In other words, resale prices continue to adjust quicker to market conditions than developers, not necessarily because they’re smarter, but because a 25% drop in new condo prices renders many projects insolvent.

Given all of the above, it becomes increasingly obvious why policy makers decided to step in and remove the 13% HST tax on new housing just a few weeks ago.

Multi-decade lows in housing activity is prompting all levels of government to reasses, whether it be HST, GST, Development charges, foreign buyer taxes, or even AirBnb bans.

The BC Government has granted the city of Kelowna a sudden exemption from the AirBnb ban. I guess the finally figured out the local economy relies on tourism.

Not only is the Kelowna economy struggling, but vacancies have soared, not because of the AirBnb ban, but from a massive building boom. Kelowna is enduring record completions of new condos and apartments.

Chief executive of the Kelowna Chamber of Commerce, George Greenwood, said the business community is “elated” by the news, even if some would have preferred to see the changes take effect earlier. Greenwood said Kelowna has seen an increase in purpose-built rental housing coming online in recent years, so the lack of units isn’t a concern.

“We have hundreds of units sitting empty right now,” he said.

If he thinks there are a lot of empty units right now, just wait.

Kelowna has nearly 35% of their total rental supply currently under construction.

The vacancy rate has ballooned from its lows of 0.6% to 6.2% today and is poised to move higher.

Ironically, the BC government will attribute the rise in the vacancy rate to their successful policy making, but it’s really the feds who should take the credit here.

As I highlighted in a recent piece on The Loonie Hour Substack, the rental boom is entirely a result of the CMHC’s MLI program which allows Real Estate developers to finance up to 95% of the cost of new rental construction, and then, on completion, assuming you meet the debt servicing requirements, allows the ability to refinance the building up to 95% Loan to Value, and a 50 year amortization.

CMHC has pushed their exposure to the rental construction business from 5% in 2017 to nearly 90% today.

Don’t be surprised to see this program get tightened further as vacancy rates climb closer to double digits in some cities.

Like we said earlier, policy makers will be busy in the coming year as they contend with a sharp reversal in the housing market. Most of these housing related policies were birthed in a bull market.

Let’s watch.

Steve Saretsky April 20th, 2026

Posted In: Steve Saretsky Blog

Next: Spain Embraces the “Great Replacement” »