Canada is facing a paradox in 2025. On one hand, policymakers and media outlets continue to warn of a deep housing crisis. On the other, real estate agents across major cities are reporting that homes are sitting on the market longer, listings are being cancelled, and landlords are struggling to rent out units. How can both be true?
The answer lies in a complex mix of affordability, shifting buyer psychology, and structural challenges that continue to choke the housing system.
In the Greater Toronto Area, one of Canada’s most closely watched markets, sales activity has slowed noticeably. Home sales in August 2025 dropped 1.8% month-over-month, while the Home Price Index slipped to around C$978,100. Prices are down, borrowing costs have eased slightly, and yet demand remains weak. Buyers who might have rushed into the market a few years ago are now staying put.
National forecasts from the Canada Mortgage and Housing Corporation (CMHC) predict that average home prices could fall another 2% through the rest of the year, particularly in Ontario and British Columbia. What looks like an opportunity on paper isn’t translating into activity on the ground.
Back in 2021 and 2022, buyers were afraid of missing out. Homes were snapped up within days, often with bidding wars that pushed prices far above asking. Fast-forward to 2025, and the mood is strikingly different. Surveys show that more than half of repeat buyers now worry they overpaid for their homes.
This shift in psychology is powerful. Instead of stretching their finances to secure a property, many potential buyers are choosing to wait, fearing that prices could slide further or that their jobs may not be secure in a slowing economy.
For much of the last decade, rental demand outpaced supply, leading to skyrocketing rents in cities like Toronto and Vancouver. But in 2025, the rental market is showing cracks. New supply is coming online, demand is softening, and many landlords cannot raise rents enough to cover their rising mortgage payments.
This is leading to panic listings as homeowners who bought at peak prices try to offload properties they can no longer afford. Agents report that even well-located rentals are taking longer to lease out, a reversal from the frenzied activity of just a few years ago.
Investors, who played a major role in driving up demand for condos and new construction, are now retreating. Pre-construction condo sales have fallen sharply, and many projects are stalling without the upfront financing that presales once provided.
For home developers, this means fewer projects break ground. For buyers and renters, it means that long-term supply shortages are unlikely to ease any time soon, even as today’s listings pile up.
At its heart, Canada’s housing crisis is still about affordability. Despite falling prices, the combination of high interest rates, stagnant wage growth, and rising unemployment is keeping homeownership out of reach for many. Even renting is a stretch for middle-income households, particularly in the largest metropolitan areas.
Zoning restrictions, construction delays, and elevated building costs compound the problem. The result is a housing system that feels broken from every angle: too expensive to buy, risky to invest in, and increasingly unstable for renters.
Economic Uncertainty: People are holding off on major purchases until they feel more secure.
Psychological Shift: Fear of overpaying has replaced fear of missing out.
Rental Supply Growth: More units available, but fewer tenants able to afford them.
Investor Retreat: Fewer pre-sales and new developments slow future supply.
Affordability Gap: Wages aren’t keeping pace with ownership or rental costs.
The paradox of 2025 is that Canada can have a housing crisis and weak real estate activity at the same time. The crisis is not about the number of homes on the market but about the ability of Canadians to afford them. Until incomes, financing, and construction policy align more realistically, agents, buyers, and renters will remain stuck in this uneasy standoff.