FIRST READING: At least the real estate is getting affordable
Canada is grappling with declines in wealth, productivity and even overall happiness. Yet amid the gloom, one of the country’s most stubborn problems is finally easing: the cost of housing. Recent data signal that the extraordinary real estate bubble that defined the last decade — and exploded during the pandemic — is deflating.
Home prices retreat to 2016-era levels
In the Greater Toronto Area, benchmark prices have fallen to levels not seen in years. The latest figures from the Toronto Regional Real Estate Board put the benchmark home at $938,800. Adjusted for inflation, that is a 10-year low. For context, the benchmark at the end of 2016 was $728,500, which translates to roughly $950,890 in 2026 dollars — higher than where Toronto sits today.
Nationally, the Canadian Real Estate Association reports a benchmark of $661,300. On an inflation-adjusted basis, that’s hovering around the prices last seen in the summer of 2016. In August 2016, the national benchmark was $493,400, or about $652,752 in 2026 dollars. After years of relentless gains, prices across much of the country are back in the neighbourhood of their pre-pandemic trajectory.
What changed? COVID-era lockdowns and income supports pumped the economy with cash while simultaneously shutting off travel and other spending avenues. Canadians diverted billions into housing, bidding up properties in big cities and small towns alike. Even rural markets that once seemed insulated, such as the cottage region of Muskoka, Ontario, saw dramatic spikes — values there surged by about one-fifth in 2021 alone.
That frenzy has cooled. Prices have not only come down from the 2021 peak, they are increasingly dipping below pre-COVID highs in several markets. For a country that spent years at the top of global unaffordability rankings, this is the first meaningful progress in some time.
How we got here — and what’s next
For at least a decade, Canada has been the standout case where home prices became the most disconnected from local incomes. International measures of price-to-income repeatedly placed Canada at or near the top for unaffordability, and the country has often held the No. 1 spot in recent years. Portugal has been one of the few consistent competitors, amid its own surge driven in part by tourism-related conversions of housing.
The structural break traces back to the early 2000s, when Canadian home prices began to diverge from real disposable income. For decades — from the 1970s onward — those two lines tended to move together. In the 21st century, house prices kept rising regardless of whether Canadians were getting richer or poorer. The pandemic pushed that disconnect to extremes.
Now, with higher borrowing costs, softer demand and subdued economic growth, the market appears to be reverting to a more orthodox pattern: when the economy cools, housing cools. A recent analysis by BMO economist Robert Kavcic anticipates the trend has room to run. “Bigger picture, the market continues its long and slow downturn,” he wrote, adding that “we don’t expect this downward momentum in real home prices to turn around soon.”
None of this guarantees a smooth path to affordability. Inventories remain tight in several regions, immigration flows continue to reshape demand, and construction capacity is constrained. But the direction of travel — with inflation-adjusted prices rolling back almost a decade in some markets — is doing what dozens of demand-side policy tweaks could not.
Air Canada tragedy triggers political fallout
Beyond housing, a separate national shock unfolded with Air Canada’s first fatal incident in 43 years. On Sunday night, an Air Canada aircraft taxiing at New York’s LaGuardia Airport collided with an airport fire truck. Both pilots were killed and multiple passengers injured, including a flight attendant who was reportedly thrown clear of the plane while still strapped to her seat. The last time lives were lost on an Air Canada flight was in 1983, when an on-the-ground fire at a U.S. airport killed 23 passengers, among them Canadian folk singer Stan Rogers.
The tragedy has revived long-standing concerns about U.S. air traffic control. Chronic staffing shortfalls have been documented for years, and critical facilities have frequently operated below target staffing levels. A U.S. congressman called the collision a grim warning about the dangers of understaffed control towers.
In Canada, the immediate political debate has unfolded along a different axis: official bilingualism. Air Canada CEO Michael Rousseau issued condolences in a video message delivered in English with French subtitles. That prompted complaints to the Commissioner of Official Languages and a move by the House of Commons Committee on Official Languages to summon Rousseau, arguing his approach was incompatible with the obligations of the Official Languages Act and public expectations.
Quebec’s justice minister said Rousseau should resign if he cannot communicate in French. Prime Minister Mark Carney criticized the CEO’s response as lacking compassion, noting that a company like Air Canada has a responsibility to communicate in both official languages — a remark the prime minister delivered in English and did not repeat in French.
The bigger picture
Canada’s real estate comedown, while painful for recent buyers and builders, is finally chipping away at a housing crisis that long outpaced incomes. At the same time, the Air Canada disaster underscores how quickly operational failures can become political flashpoints. Expect both stories — a slow, policy-laden housing adjustment and a fast-moving debate over language, safety and accountability — to keep shaping Canada’s economic and political landscape in the months ahead.
