Canada Is Not One Market: Understanding Regional Divergences in Real Estate

As Canada grapples with higher borrowing costs, decelerating population growth, and evolving policy landscapes, the fallout is anything but uniform across its vast geography. In a recent discussion with the Bank of Canada, Peter Norman, Vice President and Economic Strategist at Altus Group, shared insights into how these factors manifest variably across Canada’s housing and commercial markets. Instead of viewing Canada through a monolithic lens, recognizing and understanding regional differences is crucial for stakeholders navigating this complex landscape.

Ontario and B.C. Work Through a High-Rise Reset

The most stark adjustments are currently unfolding in Ontario and British Columbia, particularly within the Greater Toronto Area (GTA) and Metro Vancouver.

In Toronto, the commercial real estate scene is witnessing a downward trend. Land transactions have plummeted, contributing to a projected 15% decrease in overall commercial transaction volume year-to-date compared to 2022. With the exception of a few resilient sectors—such as upscale hotels—the development pipeline appears sluggish.

Metro Vancouver presents an even more acute example of this shift. The region’s pre-sale condom market has experienced substantial stagnation, with year-to-date sales down approximately 60% from a lackluster 2024. Best-selling projects now yield minimal sales each month. Many developments initiated over the past two years have faced delays, redesigns, or have simply ceased to progress.

Despite their unique planning histories, both Toronto and Vancouver share a significant challenge:

1. Pre-Sale Dependency: New high-rise projects struggle to secure adequate pre-sales, as the volume has sharply declined.
2. Resource Commitment: Developers, having already invested heavily in approvals and designs, find it challenging to pivot their projects mid-stream.

The "70% pre-sale rule," though not a formal regulation, serves as a critical lending guideline that has hardened in the current environment, preventing viable projects from advancing. Adding another layer of complexity, while construction cost indices report inflation rates of 4-6% in cities like Toronto, recent tender results indicate a 15-20% decline in high-rise project costs compared to peak levels from two years ago. This gap underscores the risk of decision-makers relying solely on outdated data.

In summary, the landscape in Ontario and B.C. is not merely “slower”; it is actively in the process of reevaluating how and what types of high-rise developments are feasible given the current economic climate and shifting consumer preferences.

Quebec Finds a Balance Between Ownership and Rental

In contrast to its western counterparts, Quebec’s housing market is navigating its challenges with a different approach. While housing starts remain steady, underlying risks loom as projected population growth slows significantly in the coming years. In Montreal, new home sales have already begun to reflect this trend, decreasing by about 30% compared to last year and hovering around 80% below pre-pandemic levels.

Nevertheless, Montreal has shifted more decisively toward purpose-built rental units, forecasting nearly 10,000 new units this year. This transition mitigates some of the potential downturn risks for the construction sector, even as ownership-oriented projects face headwinds.

For lenders and developers, Quebec’s experience illustrates that weaker new home sales don’t always correlate with a broad construction downturn. Instead, a nimble approach that shifts product mix to meet stable demand can sustain activity in the market.

Alberta and Atlantic Canada Follow Different Adjustment Paths

While Alberta is also undergoing adjustments, it finds itself in a different position. Calgary and Edmonton are beginning to experience softer resale demand and decreased new home sales, according to data from Altus Data Studio. However, Alberta’s population growth remains relatively stable, and housing affordability is more favorable compared to Ontario and British Columbia.

Moreover, high-rise, pre-sale reliant development is not as prevalent in Alberta, which somewhat insulates it from the challenges facing Ontario and B.C. While the province is not immune to rising interest rates and shifting sentiments, its market shows resilience.

Conversely, Atlantic Canada showcases another contrasting approach. Many regional markets are already accustomed to smaller mid-rise developments and selective, speculative constructions. Here, developers and lenders often employ different risk structures that allow projects to proceed without stringent pre-sale thresholds, adapting to market demands uniquely.

These regional distinctions are significant, illustrating that the disruptions faced in Ontario and B.C. often involve adjustments already standard elsewhere in the country.

Why Regional Differences Matter for 2026 Decisions

As Canada heads toward 2026, the pressing question isn’t whether the market is strong or weak; it’s about where the exposure and risks lie. Ontario and B.C. hold more stakes in large, pre-sale-dependent high-rise projects, while Quebec’s outlook on population and home sales is somewhat moderated by a robust pipeline of rental constructions. Alberta’s greater housing affordability, alongside sustained population growth, offers a cushion against upcoming challenges.

Implications for Stakeholders:

• Lenders and Investors: Strategies should be fine-tuned to local conditions rather than relying on national averages.

• Developers: Future pipelines must be informed by understanding the constraints on high-rise models, adjusting toward mid-rise or alternative development formats that are more in-line with local market demands.

• Policymakers: Growth plans centered around a continuous influx of high-rises in certain markets may need to evolve towards a more flexible, diversified approach.

The adjustments currently in play highlight that Canada’s housing narrative is not a singular story. Instead, it represents various regional markets adopting distinct strategies and risk profiles, reshaping their development models. Tools like Altus Data Studio, which aggregates apartment transactions, residential land sales, and new home sales, can empower market participants to make informed decisions based on localized insights.

In this shifting landscape, those who ground their strategies in precise, region-specific data will be best positioned to navigate the unfolding changes over the next 12 to 24 months.