As we have written before, the pre-sale market is on life support. New condo sales are virtually non-existent. After hitting 19,000 sales during the height of the bull market, they dropped to just 2900 last year, and are on track for even fewer this year.

The pain is becoming too much, and so, the great bailout has arrived. Last week, Mark Carney, in partnership with David Eby, announced the new Canada-British Columbia Partnership on Condo Conversion. They will leverage “innovative financing tools” to convert more than 2,200 vacant condo units into affordable homes.

“Looking out at condos that have been built, that are unoccupied, that are going to sit there potentially for another couple of years; we are going to go and use the right financing mechanisms and convert those into affordable housing so people can move in and use those,” said Carney.

Carney added “models” will be released in the fall. Adding, “It is a way to clear off on the books this overhang.”

In other words, we will use your tax dollars to provide the exit liquidity for our closest, and most politically connected developer friends.

Imagine telling the soccer mom in Winnipeg, or the plumber in Saskatchewan that their tax dollars are going to bail out some wealthy developers in Vancouver, the same ones who have enjoyed an unprecedented thirty year bull market.

Markets go up. Markets go down. That’s capitalism. But if developers keep the profits and taxpayers absorb the losses, that’s not a market, that’s crony capitalism.

And capitalism without bankruptcy is like Christianity without hell.

Despite the public backlash, if we assume the Carney government moves forward with this back door bailout, they will purchase 2200 unsold condos in BC. This is not an insignificant number. As of right now, per CMHC data, there are nearly 4500 completed and unsold condos in Metro Vancouver, ready for move in.

Other calculations, such as data derived from Zonda and Rennie suggest the number of completed and unsold condos sits at 3945 as of the end of Q1 2026.

In other words, the feds could absorb nearly half of the new vacant condo supply in Metro Vancouver with the stroke a pen. Insane.

Now, once we add in other parts of BC, such as Victoria and Kelowna, perhaps we can round that number up to 6000 or 7000 vacant units, as a rough estimate. Either way, your tax dollars could absorb roughly a third of all the unsold inventory in BC.

Instead of letting prices fall and allowing the free market to clear, the government is going to suppress economic gravity while picking winners and losers in the industry.

Surely we have to assume the selection process will prioritize those who are closest to the Liberal party. Established developers with strong political ties get first dibs at the trough.

If you’re a small developer, an overleveraged pre-sale buyer, or just a regular soccer mom that can’t afford her mortgage, sorry but it’s insolvency for you. Thanks for playing.

Imagine a scenario where Carney buys up all the unsold luxury condos WestBank is sitting and then fills them with low income tenants. Bet you didn’t see that coming.

Anyways, this bailout for BC mimicks what we saw in Ontario last month. Doug Ford’s Ontario plan is a $1.3B public-private fund through the Building Ontario Fund and High Art Capital (the former cannabis guys) to purchase blocks of unsold GTA condo inventory and convert them into roughly 2200 long-term rental units. Once the fund was set up, they partnered with the feds to remove the HST, immediately saving themselves 13% with the stroke of a pen.

All of this reeks of morale hazard, and they don’t even try to hide it anymore.

If we really wanted affordable housing we’d let these unsold condos fall in price, or pick them off in a forced liquidation/ bankruptcy. As we have always argued, Canada’s housing woes are entirely self inflicted through bad policy.

You don’t have to like the rules of the game, but you better understand them.

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As expected, the Bank of Canada held rates this past week. What’s perhaps more interesting, is the language they used.

“Economic weakness combined with rising inflation is a dilemma for monetary policy. Raising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent,” Governor Tiff Macklem said in an opening statement.

“For now, holding the policy rate unchanged balances those risks.”

In other words, the economy is dealing with a bout of stagflation. Quite the dilemma indeed.

Markets are still pricing in one rate hike by the end of the year. Colour me skeptical.

Remember, Q1 GDP outright contracted, a big miss considering the BoC was forecasting 1.5% growth. Whoops.

Meanwhile, as of the time of this writing, it appears the war in Iran may have finally reached an end, for the tenth time.

“The Deal with the Islamic Republic of Iran is now complete,” US President Donald Trump said on Sunday in a social media post. “I hereby fully authorize the toll free opening of the Strait of Hormuz and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade.”

Good news Tiff Macklem, the bond market, and mortgage holders alike. The Canada 5 year bond yield had already retraced 30bps over the past month, and should move further once markets are open on Monday. Let’s watch.

In other news, shelter, which is a large weight of the CPI basket continues to get crushed. Per Rentals.ca, average asking rent in Canada declined 4.7% year-over-year in May, representing the 20th consecutive month of year-over-year declines.

As of Q1 2026, the inventory of purpose-built rental units under construction reached a historic high of more than 200,000 units. Something this newsletter has been duly noting for well over a year.

Meanwhile, on a city level, rents in Vancouver have fallen on a year-over-year basis for 30 consecutive months, with the average rent now 5.6% lower than four years ago in May 2022! Rents in Toronto have fallen for 28 months, but remain 3.1% higher than four years ago.

Four of the six largest markets now have lower asking rents than three years ago in May 2023, with only Montreal and Edmonton having increased over the same time period.

As we have flagged before in our past notes, Montreal and Edmonton are not far behind. Edmonton is currently engulfed in a multiplex boom unlike nothing that’s ever been seen before, almost entirely financed via CMHC MLI rental financing. Often times, fraudulently. Although that’s a story for another time.

We continue to believe the rental market isn’t getting enough attention. Media headlines have been largely focused on pre-sale condo buyers and the mortgage renewal wall.

In other news, and perhaps on a more positive note, activity for single family detached houses in the city of Vancouver has enjoyed a noticeable uptick over the past month or so. One or two months does not make a trend, but if and when the market shifts it always happens in the single family detached market first. It starts in the city and then ripples outwards.

Vancouver house sales were up 38.5% year-over-year last month, with inventory down 10%. This is in sharp contract to the Greater Vancouver condo market which saw sales down 7%.

Single family is always the first to move. It shouldn’t be a surprise, considering we no longer build new houses. It’s a hard market to oversupply.

Move in ready houses at more attainable price points continue to sell well despite all the turmoil. Let’s see if this holds.

Thank you for your attention to this matter.

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We couldn’t help but chuckle at the comments from Premier David Eby this past week, who took credit for the precipitous decline in the rental housing market.

Yes, rents are down big time, but let’s give credit where credit is due. The Federal government, despite its sins of the past and its incredible fumble of the housing and immigration file, is finally on the right track. Rents are falling for two primary reasons,

1. Immigration is back under control. After allowing the population to inflate by a record 1.2M people per year, the feds have aggressively tightened immigration to the point where Canada and BC’s population are outright contracting. This has never happened before.

2. CMHC has insured a record amount of new rental construction financing, creating a record boom in new apartment supply.
   

Cities like Vancouver are now sitting on the highest vacancy rate in 31 years and there’s still a record supply of rental construction in the pipeline completing soon.

Yes, rents are heading lower from here, which will keep Eby happy. One last hurrah before the wheels fall off the rental construction market too.

At some point, developers and REITs are going to pull back in a meaningful way. They are cannibalizing themselves with new supply.

All you have to do is look at the latest financials from CAPREIT, Canada’s largest Residential Investment Trust, who owns a significant footprint in Ontario and BC. Overall turnover rents are down 2.1%, but turnover rent for tenants who have been in place for less than two years is down 10.8%. First flagged by my good friend Ben Rabidoux.

The oversupply in the rental market is already forcing governments to walk back certain bull market policies. Kelowna recently lifted their AirBnB ban after vacancy rates jumped from 1% to 6% (we think they could touch double digits before this cycle bottoms).

At some point Eby might think twice about cheerleading the decline.

Speaking of cheerleading the decline, despite the Canadian Real Estate blungeoned by the sharpest price decline in more than three decades, Canadians say it hasn’t gone far enough!

About 55% of Canadians want home prices to fall further, with that figure jumping to 69% among 18- to 34-year-olds, according to a Nanos Research Group poll for Bloomberg News.

Even among homeowners, two-thirds told Nanos the price decline to date was a positive or somewhat positive development for the housing market.

It’s not often you see the majority of Canadians cheering for home prices to fall, yet here we are.

It’s understandable, considering affordability issues. Yet we aren’t convinced these same voters will be willing to endure the pain required to bring meaningful affordability. After all, it’s all fun and games until someone loses an eye (or a job).

Until then, the cheerleading shall continue.

Let’s watch.

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For the first time in six years, the Canadian economy slipped into a recession. Real GDP fell by 0.1% on an annualized basis during the first quarter, Stats Canada reported on Friday. That follows a 1% contraction in the fourth quarter.

The mainstream media is framing it as a “technical recession” because I guess its the polite thing to do while we wait twelve months for a bunch of PhD’s at the CD Howe Institute to officially declare it.

Whether this number gets revised higher by a couple basis points a few months from now is irrelevant. The point is, for a lot of Canadians, these are tough times.

In the major metros of Toronto and Vancouver it’s felt like a recession for a few years now, especially if you’re involved in the Real Estate sector.

In fact, It’s long been argued that housing is the business cycle.

In a research paper titled ‘Housing is the Business Cycle’ written by Edward Leamer at the National Bureau of Economic Research, he argues:

Housing is not just another interest-rate-sensitive sector — it is the business cycle’s early-warning system. Residential investment may be a small share of long-run GDP growth, but around recessions it becomes disproportionately important. Housing turns first, consumer durables follow, and business investment typically weakens later. That sequencing matters. By the time the labour market rolls over and policymakers recognize the downturn, housing has often been flashing red for quarters.

The key insight is that housing downturns are not primarily price events — they are volume events. Prices are sticky on the way down, so when demand softens, transactions collapse. That drop in volume then ripples through construction, mortgage finance, real estate services, renovations, furniture, appliances, and local employment. In that sense, housing is less a side effect of the cycle and more often the mechanism through which the cycle arrives.

For regular readers of this newsletter, this is glaringly obvious. In Toronto and Vancouver we’ve already seen resale housing volumes collapse to multi-decade lows. Last year, the Greater Vancouver area endured a 25 year low in annual home sales.

This has flowed through to the construction sector, where investment demand has collapsed, killing the pre-sale market. The number of pre-sale condos sold has gone from 19,000 in 2021 to just 2900 last year. So far in 2026 we’ve sold 469 units, and are projecting to end the year somewhere around 1500. This is getting awfully close to zero when you consider how many of these 1500 sales will be cancelled once these projects don’t hit sales targets for construction financing.

This of course flows through into other consumer durables, such as appliances. Coast Appliances — which employs 300 people at nine distribution centres and 17 showrooms across Canada files for insolvency.

News of Coast Appliances’ difficulties wasn’t a surprise within Canada’s stressed development sector.

“I didn’t have any information about Coast, but I wasn’t surprised that a supplier to the residential development industry got in trouble,” said Michael Drummond, interim CEO of B.C.’s Urban Development Institute.

“When housing stalls, the whole supply chain feels it. Presales have basically collapsed, unsold inventory is rising, and it’s harder to (plan) any new thing right now.”

You don’t say.

Anyways, despite all of this, markets are still pricing in a rate hike from the Bank of Canada by the end of this year.

I guess markets believe the Bank of Canada can alleviate inflation derived from a war in the middle east by plunging a few more households into insolvency.

It’s worth noting that the Bank of Canada was projecting 1.5% annualized increase in GDP last quarter. Instead they got hit with a “technical recession”

One could argue they should probably be cutting, not hiking. But alas, don’t count on them to do the right thing. Need I remind you the Bank of Canada started hiking rates in March of 2022, one month after the housing market had peaked, and home prices had already inflated by a record 23% in a single year.

Patiently waiting, let’s watch.

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Despite the sharpest house price correction in more than three decades, mortgage arrears in Canada remain low. Recent data from the Canadian Bankers Association shows the national arrears rate was a paltry 0.28% (as of February 2026), which means just over a quarter of a percentage point of mortgages are in arrears. Or rather, 28 mortgages out of every 10,000 were 3+ months behind on a payment.

This is well below levels in the United States and the United Kingdom.

In other words, nothing to worry about. Right?

However, one can’t help but notice the growing number of court-ordered listings littering the MLS.

In fact, the number of court ordered listings for sale is the highest it’s been in two decades.

The reality is, the Canadian Bankers Association only tracks mortgage arrears at federally regulated banks. What’s missing from their 0.28% figure is all the bad loans issued by credit unions, private investors and mortgage investment corps.

This is likely why the MLS is telling us a much more concerning story. The big banks are the most conservative of lenders, but even for them, we believe the trend is higher.

From a close industry source, Mortgage delinquencies at one of the big banks have doubled in the past three months. With 70% of the growth coming from Vancouver & Toronto.

In other words, more forced sellers looking for a bid in an illiquid market.

Stress is evident everywhere you look.

Here’s consumer insolvencies in BC. Record highs. Courtesy of my good friend Ben Rabidoux.

Keep in mind this is just at the retail level. We’ve repeatedly noted the enormous stress in the development space, which is really ground zero for this bear market.

From an article in BC Business magazine this past week,

Bids are com­ing in below the debt levels on projects that have run into trouble in the last year. And there seems to be no end in sight.

“This is a monu­mental re-set,” says Mark Good­man, whose broker­age spe­cial­izes in apart­ment and multi-fam­ily devel­op­ment sites. The com­pany has a list of court-ordered sales on projects from Van­couver to Langley that it’s work­ing on. “We’re going to see con­tinu­ing pain and more dis­tressed sales for at least two years. And the price is going to have to be sig­ni­fic­antly lower.”

At the Van­couver Col­li­ers divi­sion that deals with fore­clos­ures, court-ordered and des­per­a­tion sales, it’s the same story.

“Until early 2025, we had sev­eral land sales in dis­tress that res­ul­ted in mul­tiple com­pet­ing offers when presen­ted to court for approval. In the early part of last year, there was greater optim­ism that the mar­ket would recover. This has stalled with uncer­tainty remain­ing on where pri­cing is going to land,” says Jen­nifer Darling, asso­ciate vice-pres­id­ent.

The beatings will continue until morale improves.

Here’s completed and unsold inventory. Finished units sitting empty, accumulating interest costs.

Nobody knows when we’ll hit bottom. Timing markets is hard. Although it’s safe to say we have a pretty high conviction that distressed, court-ordered listings should continue to accelerate through the back half of this year.

Let’s watch.

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No Real Estate developer epitomizes the Vancouver Real Estate bull market quite like West Bank. Lavish luxury towers that shine above the Vancouver skyline, sold at record breaking prices. There was seemingly no price too high! After all, it was art in the sky, and chandeliers under bridges.

Impressive sales centres, unparalleled marketing. All of which attracted deep pockets from overseas buyers, desperate to hold a trophy asset in the skies of Vancouver. Local buyers couldn’t resist either.

And then, suddenly, the music stopped.

A plethora of foreign buyer taxes, speculation and empty home taxes all slowly leaked the air out of the bubble, just before Tiff Macklem at the Bank of Canada slammed the brakes in the summer of 2022 with a 100bps rate hike.

Today we are left tracking the fallout.

As reported by Howard Chai over at The Realist, A substantially-completed rental tower by prominent Vancouver-based developer Westbank has been placed under receivership, according to filings in the Supreme Court of British Columbia. The first one to date this cycle.

The 35-storey rental project is known as Joyce 2 and is located at 5083 Joyce Street in Vancouver, directly across the street from Joyce 1. Joyce 2 consists of 360 rental units and 4,500 sq. ft of retail space and the property is held by Westbank under 5055 Joyce Property Inc.

The receivership application was filed by Toronto-based pension fund OPTrust, which bought out Westbank from Sen̓áḵw last year for an undisclosed price. Notably, however, OPTrust is the second-ranking mortgage holder and the first-ranking mortgage holder is National Bank.

“The appointment of a court-supervised receiver has been sought to ensure the project can reach final completion in an orderly and timely fashion,” said Westbank and OPTrust in a joint statement provided to The Realist. “This was undertaken cooperatively with Westbank and is consistent with shared objectives to facilitate the completion of the project.”

According to OPTrust, the loan matured on December 31, 2025 and they issued a formal demand for payment on January 13. Since then, OPTrust says they learned that at least five liens had been filed against the project and that National Bank issued a demand for payment on January 8 after at least six defaults, including failing to make interest payments and failing to comply with equity infusion obligations.

OPTrust also said that a report prepared by the project’s development cost consultant estimated cost overruns of $15.5 million, with $8.2 million related to hard construction costs.

As of March 19, OPTrust says it is owed $109,211,965, with interest now accruing at the default interest rate, which amounts to $60,136 per day.

OPTrust says National Bank, which is in support of the receivership, is not prepared to advance additional funds for the project and that the project is now “at a standstill due to a lack of available capital.”

The announcement hardly comes as a surprise, but rather it’s surpsing how long it took.

Financial issues have been well documented, and according to public reports, Westbank been an active seller in recent years in a bid to free up liquidity.

A recent lawsuit from a former employee also notes a list of issues with Westbank projects, according to an affidavit first reported by Bloomberg.

The Alberni, a distinctive high-rise tower in Vancouver designed by the firm of famed Japanese architect Kengo Kuma, has “many unsold units” and vendor take-back mortgages outstanding, the message said. The recently opened Butterfly, another unique condo tower in Canada’s third-largest metro area, “is well over budget and closings are slow and uncertain,”

Those two projects have seen some eye watering resale activity this year.

The first resale at the Butterfly has now sold firm and closed on the MLS. Originally sold pre-sale for $2,561,000 (plus GST) has now sold as a completed resale for $1,518,000. That’s a million dollar loss not including the 10% in fees on top (GST, PTT, Realtor and legal fees).

In other words, the mark to market is at $1425/sqft. That’s a far cry from the building average pre-sale price of $2800/sqft per Altus Group.

It’s a similar story over at Westbanks other marquee high-rise, Kengo Kuma, which completed a few years earlier.

Let’s be honest, there’s nothing new about a Vancouver developer having a project slide into receivership. However, one can’t deny the fascinating story of WestBank, a former bull market darling that caught the allure of what we thought was sophisticated capital.

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We’ve written a lot about the Canadian rental market. A rental construction boom financed by the federal government has pushed vacancies to multi-decade highs, and pushed rents down by double digits across most major metros.

Rental construction is almost entirely financed through CMHC, a government-owned crown corporation. They are now financing nearly 90% of all new rental construction in this country, through their MLI program which offers 95% loan to cost on new construction, and 50 year amortizations on completion. Some in the industry have called it '“welfare for developers”.

Nonetheless, it’s been a successful program in bringing on new supply. So, mission accomplished.

It caught our attention this week when the government announced new rental financing measures in its spring economic update.

The government is taking action to help lower financing costs to build residential properties with up to eight units.

The Spring Economic Update 2026 announces the government’s intention to:

• Amend mortgage insurance rules to permit private mortgage insurers to offer multi-unit mortgage loan insurance on five- to eight-unit residential properties to promote competition and offer lenders more choice; and

• Amend mortgage insurance rules to increase flexibilities for mortgage insurers to offer products to borrowers building new three- and four-unit housing, helping unlock financing for “missing middle” homes such as triplexes and fourplexes—an important step toward increasing housing supply and addressing Canada’s housing shortage.

  
  The government will initiate a 30-day consultation on these measures and announce further details after this consultation.

Here’s what we think it means, in plain english.

The feds know they have way too much exposure to a rental market that is deteriorating quickly. However, if they pull the plug, new construction likely goes to zero, since rental is the only thing getting built now that pre-sales are running at 40 year lows. New construction going to zero doesn’t get you re-elected when nearly 9% of your labourforce is employed in the construction sector.

In other words, the feds want to pull back but can’t. So they’re attempting to trim back exposure, slowly. Last year they raised insurance premiums on the rental financing program. Now they’re suddenly allowing the private insurance market to come in and play ball. It’s all rather convenient timing.

We find it interesting that they’re only allowing the private insurers to finance up to eight units, which is the sweet spot for Alberta multiplexes, a product that is becoming grossly oversupplied. New rental multiplexes are popping up on every street corner, financed at nearly 100% LTV, and then flipped to unsuspecting Toronto investors (the same investors that used to buy pre-sales are now buying highly levered multiplexes).

Multiplexes have become the new hot thing, with retail money hot to trot.

One barrier to the multiplex space is the CMHC MLI program currently requires a minimum of 5 doors. However, in cities like Vancouver, we are often constrained to triplex or fourplex due to lot sizes of 4000sqft which make building five doors nearly impossible. So the feds have a solution for that too. Insured financing for three and four doors. What could possibly go wrong?

Just to clarify, we don’t like dislike the multiplex, and we don’t have a problem with the government offering a carrot to the private sector to build new housing. However, we can’t help but notice the risks building.

We continue to believe that the real estate cycle has turned, and the market is oversupplied, with more supply coming. Everyone is now chasing multiplexes, including bigger developers who used to sell pre-sale condos! Furthermore, anytime we see Toronto investors chasing a hot trend, we get both excited and nervous.

Investors chasing triplexes and sixplexes built on maximum leverage will probably go down for the dirtnap. After all, cheap and abundant credit served up on a platter always ends the same way.

Furthermore, the feds continue to emphasize they are happy to see falling prices and cheaper rents. Just look at the tone of messaging from their economic report.

Overall construction activity has remained elevated by historical standards. Housing starts totaled 260,000 units in 2025—well above the 2000–2019 average of about 200,000—driven by record levels of purpose-built rental construction supported by federal measures.

Growing supply—combined with efforts to bring population growth back to more sustainable levels—is helping to narrow Canada’s housing supply gap and deliver meaningful improvements in affordability.

Since recent peaks, average home prices have declined by 20 per cent, national rents are nearly 9 per cent lower than their 2024 peak, and average monthly mortgage payments for homeowners have fallen by more than $1,200 in Toronto and Vancouver, almost $400 in Calgary, and over $200 in Halifax from peak levels.

Together with continued gains in real household incomes, these developments are restoring purchasing power and easing access to housing for renters and first‑time buyers.

In other words, the messaging out of Ottawa seems to suggest they are pleased to see lower prices. That’s fine, they were elected to do so. However, we are left wondering why any prudent capital allocator would still be eager to deploy capital into a market that is being managed lower, other than the allure of immense leverage…

Let’s watch.

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Real Estate foreclosures are ramping up, and the stigma of defaulting is starting to fade. Our recent piece on The Loonie Hour Substack, guest authored by Ben Rabidoux highlights why strategic default is turning from a "moral failure" into a mainstream financial strategy.

Yes, media articles are now recommending it could make more sense to simply walk-away from your Real Estate.

And that’s exactly what’s happening, although its largely concentrated in the new condo space.

“I’ve been a real estate lawyer for almost 50 years, and I’ve never seen anything quite like this,” said Vancouver-based real estate lawyer, Perry Ehrlich.

The pre-sale condo collapse is well documented, with more buyers walking away. That’s an issue likely to grow with OSFI desperately trying to pull the rug on blanket appraisals which have, in many cases, ignored market values and financed buyers up to 100% LTV using stale appraisals on new condo units.

Defaults on pre-sale condos are increasingly common, yet actual mortgage defaults remain low from a long term historical basis. As my friend Ben Rabidoux points out in his piece on The Loonie Hour Substack, mortgage defaults in Canada are still below their 30 year average.

However, the three month change in mortgages going delinquent has surged by 1,200. You have to go back to Q2 2020 when the world locked down (and before the federally-imposed COVID “mortgage payment holiday”) for the last time delinquencies moved this sharply.

Meanwhile, the number of court-ordered listings currently on the MLS, it’s reaching fresh record highs across Metro Vancouver.

There’s nothing to suggest this is going to ease anytime soon. Falling home prices and rents are leaving property owners with fewer options to get themselves out of the jam. They used to say a rolling loan gathers no loss, but with prices falling the ability to refinance the debt is becoming more difficult.

I’d also turn your attention to what’s happening in the pre-sale assignment market. Despite a plethora of new condos in the pipeline nearing completion, assignment listings on the MLS are collapsing.

This is happening because developers are increasingly restricting pre-sale buyers from listing inventory on the MLS as they attempt to limit price discovery which could impair appraisal values for other buyers in the building, not to mention the record supply of unsold inventory they’re also holding.

The exits are being barricaded. Expect more defaults to come.

It’s a pretty negative outlook, but for astute buyers, opportunities commeth.

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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.

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As we have highlighted previously, the rental market is undergoing a significant correction, and it appears poised to continue.

The city of Vancouver saw 2300 purpose-built rental units completed in 2025, the highest in four decades!

Keep in mind this is completions. We still have a pipeline full of rentals still under construction across Metro Vancouver that will be completing soon.

“We experienced a surge of housing completions — both in condominium and rental space — in the past year … and we expect this to continue for the next couple of years,” Shiva Moshtari-Doust, CMHC’s lead economist for B.C.

As a result, the vacancy rate has surged to a thirty year high in Vancouver, per CMHC.

Meanwhile, a recent report from Rentals.ca shows that rents continue to fall, dropping 5% on a year over year basis for one bedrooms, and 3% for two bedroom units.

Over the past three years, rents are now down 14% in Vancouver, an unprecedented move.

Just to recap, we built a record number of new rental housing, the vacancy rate increased, and that pushed rents lower.

In other words, the economic laws of supply and demand still hold true. Go figure.

As we have always argued, the housing crisis is almost entirely self-inflicted through policy decisions.

For once they may have got something right. Government increased the supply of credit (CMHC MLI Select) to the rental construction business, which spurred the private sector to build more rental housing, while at the same time they throttled the supply of immigration (population growth has gone from 1.2 million to zero).

Voila, affordability cometh.

This is playing out across the country, not just in Vancouver. The average asking rent in Canada fell to a 35 month low in March, with rents now falling for 18 consecutive months.

Every indication suggests the decline in rents should continue. Population growth is poised to remain anemic, and there’s still a ton of new supply nearing completion.

A healthy, well supplied rental market takes pressure off the resale market. Think about what we had a few years ago. The vacancy rate was sub 1% and rents were rising by 10% a year. This spurred speculation, investors came rushing in, betting on ever higher rents, creating excess demand in the resale market and increasing home prices. People who would normally rent decided to buy not only out of fear of missing out but also because they got sick of having to move every few years when their landlord decided to sell and cash in on the record prices.

Now we have the opposite. A well supplied market with falling rents has curbed speculation. The investors have disappeared, which is creating issues in the pre-sale market, while falling rents are killing purpose-built rental proformas. Yes, we’re sowing the seeds for the next supply shortage.

Shortages create gluts. Gluts create shortages. This is the cycle.

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Last week we wrote a piece titled ‘Vulture Funds’ in which we highlighted the quasi bailout of the construction industry via sweeping policy changes from the Ontario government and the federal government. The immediate removal of the HST tax, the taxpayer backed vulture fund used to acquire unsold condos, and now the halving of development charges. All of which are designed to lube the tracks of an industry that has come to a screeching halt.

BC is on deck.

Ten major industry groups are calling on Premier Eby to match Ontario's housing deal, a GST rebate on new homes under $1.5M and development charge cuts of 30-50%.

Whether you agree the development community (which has enjoyed a prosperous few decades) should receive a tax dollar infusion is a worthwhile debate.

However, i’m sure we can all agree, taxes on new housing are ridiculously high, accounting for roughly 20% of the cost of a new home, and should absolutely be lowered or shifted elsewhere.

I’d argue development charges should be counter cyclical. ie, you increase them marginally when the market is hot and willing to absorb them, and you reduce them when demand tapers and the costs can’t be pushed through.

Think about a city budget today. There have only been 121 condo units sold in Metro Vancouver this quarter. Down from a peak of nearly 6000 quarterly sales back in the bull market. In other words, development tax revenues have completely dried up. So you have two options today, local municiaplities can collect 50% of something, or 100% of nothing.

Not surprisingly, not everyone agrees.

“Literally, in one municipality this evening, there is consideration going toward council to increase their development cost charges by 167 per cent. That’s Port Moody. At a time when our industry is sounding alarms to be reducing these, municipalities are not listening. So there is optimism that our province will follow suit with Ontario,” said Matthew McClenaghan, president of Vancouver-based Edgar Development.

It’s slashing time. Because, well, everyone is taking less these days, and its not just developers.

Greater Vancouver sales figures for the month of March show no improvement in sales activity. Home sales were down 3% from last year, coming in at their second lowest total in 20 years. Home sales are running 36% below their 20 year average!

Inventory remains elevated at 7 months of supply which is continuing to squeeze prices lower. Home prices, as measured by the HPI, were down 7% across all property types, and 8% for condos.

This is the resale market adjusting in real time, every month they tick lower. That’s a death sentence for a developer sitting on a project that’s only 70% sold out.

It’s also a serious problem for existing buyers in the project who now face appraisal risks. Pre-sale buyers unable to securing financing and walking away from their contracts is all the rage these days.

“I’ve been a real estate lawyer for almost 50 years, and I’ve never seen anything quite like this,” said Vancouver-based real estate lawyer, Perry Ehrlich to CTV News via Zoom on Friday.

“Usually real estate is great, and if you hold it, it only gets better and better. But what’s monumental is the fact that people have put down huge deposits and think they can get bank financing… and they can’t.”

“It’s very unfortunate,” said another real estate lawyer, Alexandra Raszewska in a Zoom interview with CTV News Friday. “We’re getting a lot of calls, I’d say one or two a day where people are struggling. Closings are coming up this year, and they can’t cover the gap.”

Pre-sale buyers are stuck. Many of which relied on blanket appraisals that the banking regulator is now pushing to end.

What’s interesting is that assignment listings are collapsing in Metro Vancouver.

Normally you’d expect this number to grow with people seemingly wanting out of their pre-sale. However, what this data tells us is two things.

1. Realtors are likely telling these pre-sale buyers there is no market/ no demand for their overpriced assignment.

2. Developers are increasingly blocking assignments from hitting the MLS as any assignment offloaded at a discount will impair the values for the rest of the building. Remember, developers are also sitting on a record number of unsold units themselves.

   

   Like we said, everyone gets to take less.
   

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For the past several years this newsletter has highlighted the slow motion trainwreck that is the new condo market. The math on pre-sales hasn’t worked for a long time. Quite simply, the cost to deliver new supply was well above the resale market. The gap grew ever larger but the market didn’t care. Eager investors continued to pay steep premiums, blinded by the euphoria of a historic bull market.

Then, in March 2022, the music stopped.

The Bank of Canada began a rate hiking crusade, and immediately put an end to the euphoric pre-sale market.

Fast forward to today. New home sales in the GTA are running at 45 year lows. There were just 5314 new units sold in 2025. The lowest levels on record since they started collecting data, and 81% below the ten year average. Totally dead.

The pain is becoming too much for government to ignore.

A few weeks ago we learned the Ontario Government was partnering with investment firm ‘High Art Capital’ by announcing a $1.3 billion partnership to turn roughly 2,200 unsold GTA condos into rental units. The province is using the new Building Ontario Fund (BOF) to buy already built condos. The partnership will purchase blocks of at least 10 condos, built after January 1, 2023. Privately-run rental firms will manage them, and 25% of the units will be “affordable.”

This week, we learned the Ontario Government, in partnership with the Federal Government, is planning to temporarily remove the Harmonized Sales Tax (HST) for buyers of new homes.

Premier Doug Ford announced the plan, saying the full 13% tax will be removed for new homes valued up to $1.5 million from April 1, 2026 to March 31, 2027 for both primary end-users, and investors.

"Please get everything together, you have one year ... talk to your bankers and start buying the homes.” said Ford.

Convenient timing to say the least.

The taxpayer backed vulture fund will immediately save themselves 13% in purchasing costs with the stroke of a pen.

The Real Estate bailout has begun. The only thing that’s surprising is how long it took.

We expect more goodies are on the way, and not just for Toronto.

Keep in mind, nearly 9% of the Canadian labour force is employed in the construction sector, and the fallout is not contained to just the GTA.

New home sales are equally as dreadful in Metro Vancouver. Altus Group data shows the numbers are slightly higher than Mr. Jarvis suggests, currently sitting at 121 condo units sold this quarter. Down from a peak of nearly 6000 quarterly sales back in the bull market.

Meanwhile, we have 11,000 unsold new condos currently sitting on developer balance sheets. This is effectively “shadow inventory” as most of these units are not listed on the MLS.

I’m not aware of any vulture funds in Vancouver, but there’s probably a business idea here.

Last year the development community lobbied the federal government to remove the foreign buyer ban on the sale of new homes.

Freshly annointed housing minister, and former mayor of Vancouver, Gregor Robertson, seemingly obliged.

“We need to figure out the best role for offshore capital to play in the housing market,” the former Vancouver mayor said in an interview with Bloomberg News.

“We need to make sure housing is built and owned for Canadians first,” he said. “That said, we’ve seen more innovation on this in countries like Australia that enable some foreign investment into higher-end new homes, or in some cases rental housing.”

The foreign buyer ban officially expires January 01, 2027. We expect the taps will be turned back on, at least for new construction purchases. After all, the demise of the pre-sale market is started to put a dent in government tax coffers.

Let’s watch.

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As expected, the Bank of Canada held rates this past week. However, what caught our attention was the Banks dovish commentary, and the ensuing market reaction. Per the BoC press conference:

“The risk that higher energy prices quickly spread to the prices of other goods and services looks contained.”

“Governing council will look through the war’s immediate impact of inflation but if energy prices stay high, we will not let their effects broaden and become persistent.”

By all accounts it was a dovish presser, and markets interpreted it as such. Markets internalized the speech, and largely expected the BoC to remain on hold until the end of the year, with one rate hike priced in for Q4.

Less than 48 hours later, with energy prices surging, and bond yields ripping, traders in overnight interest rate swaps pivoted aggressively, betting that borrowing costs will increase by 75 basis points in 2026, starting with a 25bps point hike in July. Boom.

In other words, we’ve gone from no rate hikes before the war, to one rate hike expected on March 18th, to three rate hikes on March 20th. An unprecedented move.

If traders are right, the Bank of Canada will opt to fight inflation spurred by an energy crisis from a war in the middle east, despite domestic demand collapsing. Colour me skeptical. Rate hikes will not unlock the straight of Hormuz nor will they pump a single extra barrel of oil out of the ground.

Nonetheless, it doesn’t matter what we think, the bond market is on the move. The Canada 5 year bond yield is up a whopping 30bps this week, and 60bps over the past month. Tough timing for the record number of Canadian mortgages renewing this year.

If you’re coming up for renewal or about to make a purchase, you’ll want to secure a rate hold. Ideally you would have done it a few weeks ago.

When we frame it all up, here’s what we know for sure. Home sales in Canada are tracking below last year, and mortgage rates are now going up, not down. We are going through a historical housing correction, and that looks poised to continue.

Home prices are falling, and that’s a good thing for affordability per Carolyn Rogers at the BoC.

“The housing market is looking weaker, and weaker than than we had incorporated into our January outlook. So that’s something we’ll be looking at certainly when we prepare the April outlook. As you would know, I’m sure some of the the more recent data coming out in early March looks like we might see a bit of a rebound, but it’s probably too early to tell. So, definitely, we need to take another look at the housing market. What I would say about prices is, I think I said this at the last press conference, we need house prices to come down so that housing is more affordable. We’ve all been worried about how fast house prices went up in recent years, and now we’re worried about how they’re coming down. We do need them to settle down a bit for housing to get more affordable. There isn’t really a path to affordability, particularly in some of our big centers, without house prices correcting a bit.”

Mrs. Rogers has certainly had a helping hand in correcting home prices.

However, the unwind in Canadian housing is not only due to higher interest rates, but a sharp reversal in immigration.

Canada’s population declined by more than 100,000 people in 2025, marking the first annual decline in records that date back to the 1940s. Led by a sharp drop in non-permanent residents (temporary workers and foreign students). Population growth has gone from 1.2 million per year, to -100,000.

So we have falling home prices, a declining population, and higher energy prices all weighing on demand. Will the BoC put the final nail in the coffin and hike rates three times this year? Traders seem to think so.

Let’s watch.

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We’ve written at length about the housing bust emanating across the country. In particular, in the new construction space.

New home sales have hit 45 year lows in the GTA, and aren’t fairing much better in Greater Vancouver, and so, as we noted last week,

An article in the Globe & Mail highlighted the insolvency crisis plaguing the development community. According to data from the commercial real estate data firm Altus Group, 119 “distressed sale” transactions were recorded in 2023 across the country, totalling properties worth $767-million. In 2024, those numbers rose to 191 transactions worth more than $1.5-billion. Last year, 252 distressed sales were registered, totalling more than $1.42-billion.

At this point, the housing downturn is well documented, and so we couldn’t help but notice the willful blindness from BC’s housing minister, Christine Boyle.

Premier David Eby told the real estate community Tuesday he’s very worried about slumping housing starts and stalled high-rise condo projects, as he seeks to avoid contributing to what could be a housing supply crunch in just a few years.

“We’re following the housing starts pretty closely,” Eby said to delegates from the B.C. Real Estate Association meeting in Victoria. “We’re still above the 10-year average, the building is still taking place, which is positive. But I am extremely concerned about the next couple of years and where those numbers are going to go.”

While Eby was delivering his speech to Realtors, back at the legislature his housing minister was showing anything but concern at the situation.

Christine Boyle mostly shrugged her way through questions about housing starts during her ministry’s estimates, displaying none of the concern shown by the premier.

Boyle said “housing-starts activities in B.C. continues to be at a relatively historic high,” with purpose-built rental registration “strong” in 2025 and registration of data units “exceeding” expectations, all of which is, in her mind, “signalling strong interest in continuing to build.”

Strong interest? Regular readers here are likely scratching their heads.

As we have explained previously, housing starts remain elevated, but are a lagging indicator by 2-3 years! A housing start, as defined by CMHC is once the foundation has been built back to grade.

In other words, a housing start is what happens after the land is bought, rezoned, has received its development permit, building permit, pre-sold 60% of the building, excavated, and then built a new foundation back to grade. Only then is it marked as a housing start.

In other words, if you want to know where housing starts are going there are a few metrics we’d encourage our housing minister to monitor.

Firstly, pre-sales. After all, if you can’t pre-sell the building, you can’t get the financing to dig the hole and pour the foundation.

Pre-sales in Metro Vancouver are running at shockingly low levels.

You could also look at single family housing starts. The construction cycle is several years shorter. When market conditions turn, builders can adjust quickly and turn off the taps, unlike a high-rise condo project.

Single family housing starts in BC are running at 30 year lows!

Mrs. Boyle is right, rental housing has been robust, but it too is making the turn lower. With population growth now outright contracting in BC, and a flood of rentals completing, rents are plunging, killing developer proformas in the process and keeping CMHC (Canada’s largest rental construction lender) up at night. CMHC underwrites more than 85% of all new rental construction in the country and has significantly tightened underwriting standards in recent months.

Rents in BC are now lower than they were two to three years ago.

As a result, we’re seeing more rental developments going into insolvency on completion due to an increasing number of projects unable to acheive projected rents and cover the equity shortfall.

We’re also hearing of some developers raising capital on completion to cover vacant rental units, in hopes of holding out long enough that rent prices will rebound. Remember, BC has strict rental controls. Once a tenant is placed at todays depressed rental rates you’re stuck with that tenant for years, impairing long term returns to capital partners.

Suffice to say, there’s nowhere to hide these days.

BC’s construction industry is a mess, and there’s no turning this ship around in the immediate future.

Thus, we find it rather ironic that the BC government is still forecasting rising housing starts this year and next.

We’ll take the under.

Let’s watch.

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Last week we wrote a piece titled ‘Landmark Agreements’ in which the Federal Government signed an agreement acknowleding aboriginal title for the Musqueam First Nations across most of Metro Vancouver. It was a “Landmark Agreement” according to the Feds, yet received zero mainstream media coverage. Why it received so little coverage we’ll never know, but we certainly have our theories.

After the agreement leaked on Twitter (X), it soon spread like wildfire, becoming too large to ignore.

We then learned David Eby was at the signing ceremony, but was unaware of the contents of the agreement. The Feds say he was briefed weeks ago. The Squamish First Nations says they’ll be challenging the agreement, and homeowners were told there was nothing to worry about. Just ignore the circus.

Anyways, here’s what you need to know. We interviewed First Nations legal expert Tom Isaac on the Loonie Hour this week. Nobody knows more about First Nations law than Tom. Full interview here.

In short, aboriginal title is a “senior” interest that can burden the land and said key Land Title Act protections for private lands like indefeasibility don’t apply against it. That was the legal ruling in the BC supreme court in the Richmond/ Cowichan land claim. This puts serious clout over the property market across Metro Vancouver because the rights agreement doesn’t specifically state which lands are actually deemed to have aboriginal title. All we know is that Musqueam have “rights and title” within the asserted Musqueam territory, which is most of Metro Vancouver. There is also no legal wording in the agreement which specifically limits aboriginal title to just public lands.

Why our publicly elected officals are actively entering into land agreements without consent, let alone public consultation with its voter base is bewildering. Yet nobody speaks up out of fear of upsetting the reconciliation apple cart.

Anyways, from a Real Estate perspective it’s impossible to say how this will all play out. Although it’s certainly not helping with investor confidence, in a market that is already languishing.

Home sales fell again in February, dropping 9% year-over-year, and settling at their third lowest levels in the past 25 years.

Home prices slid 7% from last year, although that figure is underreporting the true extent of it.

To be fair, it’s not just Vancouver though. It’s nearly nationwide.

An article in the Globe & Mail highlighted the insolvency crisis plaguing the development community. According to data from the commercial real estate data firm Altus Group, 119 “distressed sale” transactions were recorded in 2023 across the country, totalling properties worth $767-million. In 2024, those numbers rose to 191 transactions worth more than $1.5-billion. Last year, 252 distressed sales were registered, totalling more than $1.42-billion.

Altus Group VP Raymond Wong said they define “distress sales” as ones that involve a court proceeding – creditor protection, receivership, foreclosure, power of sale – so the data does not include, for example, a property sold by an owner at a heavy discount due to financial distress.

The asset class seeing the most distress is development land, primarily because new home sales are virtually non-existent. Remember they hit 45 year lows in Toronto last year.

Part of that reason is because resale prices continue to gap down at a much quicker pace, a pace that developers simply can’t match. This is ultimately rendering pre-sale product uncompetitive against the rest of the market. Toronto resale condo prices are now down 25% from the peak.

Therefore the beatings will continue until morale improves.

We acknowledge the traditional territory… and increasingly the receiver.

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While everyone was busy following the enormous geopolitical events unfolding in the middle east, a subtle news release from the Federal Government went largely unnoticed or perhaps intentionally burried, despite having (potentially) significant ramifications for nearly all of Metro Vancouver.

The Musqueam Indian Band and the Government of Canada signed a Rights Recognition Agreement where Canada recognizes Musqueam’s Aboriginal rights, including title, and sets up a framework to “incrementally” implement those rights through an ongoing nation-to-nation relationship.

In simpler terms, it means the federal government is formally acknowledging that Musqueam holds Aboriginal rights — including Aboriginal title on land — within its traditional territory and is committing to work out, step by step, how those rights will be put into practice. The agreement creates a structured framework for gradually implementing Musqueam’s authority in decision-making over much of the Lower Mainland’s lands and waters.

Their traditional territory includes the region’s mountainous, forested watershed that feed into Metro Vancouver’s drinking water reservoirs, as well as West Vancouver, North Vancouver City, North Vancouver District, Vancouver, the University of British Columbia, the University Endowment Lands, Burnaby, Port Moody, Anmore, Belcarra, Coquitlam, New Westminster, Richmond, Vancouver International Airport, the northern areas of Delta and Surrey, and the waterways. It overlaps with several other First Nations.

The announcement comes on the heels of increasing polarization, after the B.C. Supreme Court recognized Cowichan Aboriginal title over parts of Richmond and, in doing so, declared that historic Crown grants of fee simple and other interests can be an unjustified infringement of that title—even where today’s owners were never served or named in the case. The Court did not void private titles, but it held Aboriginal title is a “senior” interest that can burden the land and said key Land Title Act protections like indefeasibility don’t apply against it, while also suggesting Aboriginal title and fee simple can “co-exist” only in a limited, reconciled way where one must ultimately yield.

First Nations lawyer, Tom Isaac of Cassels argues the result is legal uncertainty: private owners may keep their registered titles, but the usual assumption of “clean, indefeasible” fee simple is weakened on lands found to overlap Aboriginal title, with governments now under a duty to negotiate a reconciliation framework, and ultimately leaving nearly 800 acres of land in Richmond illiquid and unsellable while this decision gets appealed in court.

The Cowichan ruling has become the biggest political hot button in the province, and will be front and center in the next provincial election. Given all of this, I have two questions.

1. Why is the Federal Government refusing to publicly release an agreement that could impact nearly two million people.

2. Why has no major mainstream media outlet covered this story?

Other than Daily Hive, as of Sunday evening, not one major news outlet has even reported this story, despite the government calling them “Landmark Agreements.”

No public consultation or documents provided, and no (state-funded) media coverage.
Until then, we have more questions than answers. A thought only more concerning when you consider the outcome of the Cowichan decision that left homeowers with no notice, no say, and no ability to defend their legal rights.

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Canada’s headline inflation rate slowed to 2.3% last month, cooler than economist expectations for 2.4%. Finally, shelter price inflation in Canada slowed to 1.7% on an annual basis, falling below 2% for the first time in nearly five years! This was largely driven by a deceleration in rent prices and mortgage interest costs.

Shelter, which is 38% of the core basket, used to be the main driver of inflation. It is now a material drag.

This shouldn’t come as a surprise for regular readers, as we have long argued CPI has failed to adjust for a rapid decline in shelter costs, both in rents and resale prices. CREA reports the national home price index fell 0.9% last month, and we are now down a whopping 20% from the peak.

Mortgage rates have been gradually leaking lower in recent weeks. The Canada 5 year bond yield has dropped about 25bps since the start of the year, bringing competitive fixed rate mortgages into the 3.8% range.

That’s good news for the record number of borrowers renewing their mortgage this year, and for aspiring homeowners. The combo of falling prices and falling mortgage rates has brought mortgage payments as a share of income to its lowest in almost four years. According to National Bank, Canadian housing affordability posted an eighth consecutive improvement in Q4’25, the longest streak ever recorded.

In other news, the BC government dropped a monster budget, pushing the deficit to a record $13.3-billion next year from this year’s forecast of $9.6-billion, and then decline marginally to $12 billion in fiscal 2028 and $11 billion in 2029.

What is perhaps most alarming is the rapid growth in debt servicing costs. By the end of the forecast horizon, debt service costs are set to reach $8.7 billion compared to $5 billion last year.

In other words, the bill has come due, and every voter gets to pay.

There are tax hikes across the board, with the NDP not only raising the first income tax bracket, but FREEZING tax bracket indexation until 2030. Tax brackets will NOT rise with inflation. A double whammy on an already strained consumer.

Ironically, the BC Government put some of the blame on a soft housing market, which put a dent on tax revenues.

You don’t say.

As we have long argued, the housing market is largely a reflection of past and current policy decisions. The current NDP government has sought to intentionally cool the housing market and they have. Since 2018, they increased the foreign buyers tax, added a luxury homes tax, added a second home tax (speculation tax), added a flipping tax, and created an AirBnb ban, just to name a few. They could be unwound tomorrow, but they won’t. In fact, they are doubling down!

The speculation and vacancy tax, or as I like to call it, the second homes tax, is going up for foreign owners and untaxed worldwide earners from 3% to 4%. However, it remains 1% for BC residents/ taxpayers, who are the biggest target of this tax.

The tax mostly hits local tax resident who own two homes in the province. It’s often a primary residence in the city, and a summer home elsewhere in the province.

For example, in the city of Vancouver, 865 BC residents paid the tax last year, compared to just 152 foreign owners.

The government is also increasing the School Tax (luxury homes tax). A tax on luxury homes which didn’t exist until 2018. Those rates are increasing from 0.2% to 0.3% for property values between $3 million and $4 million, and from 0.4% to 0.6% for property values above $4 million.

In other words, home valued at $3.5M will now pay $1500 per year. It was zero less than a decade ago.

The final kicker is the addition of PST on a plethora of real estate related services. Accounting, architectural, engineering, property management, and strata management services will all have to pay an extra 7% in provincial sales tax. All of which will ultimately flow through to prices and the end consumer.

From strata owners, to landlords and developers, the bill is due.

Ironically, despite all of this, the BC government is forecasting housing starts to RISE over the next two years. The Housing Ministry predicts that housing starts will increase marginally from 44,193 to 44,210, and to 45,920 in 2027.

This comes despite us flagging new condo sales, which are an ingredient for a housing start, just had their worst year in a long time. Sales in Metro Vancouver plunged 62% from last year and are down a whopping 85% from peak levels in 2021.

But don’t just take our word for it. Here’s CIBC’s chief economist Benjamin Tal this past week.

Housing starts— the headline numbers still present a picture of resiliency, with housing starts averaging a strong 260k in 2025, a solid increase of 5% from 2024. Even in the ground zero of the correction, the GTA and GVA, the numbers are much stronger than one would have expected given what’s happening in the field. So how is it possible that housing starts are still so strong? The answer is that they are not. The housing starts data nationally and by province and cities are provided by CMHC. Now, when does a housing start actually start? According to CMHC, a start is a start only when the foundation reaches grade. That means that in most large multi-family cases, starts are being recorded 1-2 years after the start actually occurs. This means that the CMHC housing starts data represent decisions made 12-18 months ago, and is therefore a lagging indicator.

Based on information obtained from Urbanation and Zonda, we suggest that in the GTA and the GVA, the real level of housing starts is roughly 50% and 30% below the headline numbers, respectively.

In other words, if the BC Government is worried about falling tax revenues from the housing market today, just wait until they see the housing starts data twelve months from now.

Let’s watch.

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As we noted last week, Greater Vancouver home sales continued their slump into 2026. January home sales fell 29% year-over-year in January, and were a whopping 35% below the 10 year average.

The sales to actives ratio was just 9%, the lowest reading since September 2012. In other words, only 9% of homes available for sale during the month are actually selling, which ultimately means more price reductions are coming.

Sounds bad, because it is.

However, things are getting really spicy in the new condo, pre-sale/ assignment space.

Assignments have become completely illiquid. Pre-sale buyers attempting to assign their pre-sales have been told not to bother. There’s zero liquidity in the assignment market to the point where Realtors aren’t even taking those listings anymore. This is showing up in the data too. Assignment listings on the MLS are plunging.

The number of assignments listed for sale (Greater Vancouver & Fraser Valley) have plunged from 462 listings on the MLS in April 2024 to just 90 by the end of January 2026.

If anything this number should be growing when you consider how many of these units are under water. The challenges around appraisal values are significant. One of my lenders (he works at a big 5 bank) says he’s seeing pre-sales that are completing soon typically appraising anywhere from 10%-30% lower than the original purchase price.

Blanket appraisals at TD and RBC are still around, but not everyone can get those. They’re also coming under increasing scrutiny.

The moral of the story, if you want to flip a pre-sale contract be prepared to forfeit your deposit and inject additional capital to boot.

This is not just a Vancouver story. Check out this one in the Toronto Star this week.

“A lot of the assignments that we’re working with right now, the seller actually needs to pay the buyer in order to get out of the deal, because that’s what it takes to get it to a price to sell,” said Daniel Zadegan, managing partner and sales representative at the The Zadegan Group.

So they are not only forgoing their deposit, but having to fill the pricing gap for the new buyer.

“The price that they need to sell at is below what their deposit covers,” Zadegan said.

For example, if someone signed a contract on a preconstruction condo for a million dollars, made a $200,000 deposit and the price a new buyer is willing to pay for that condo has now dropped to $700,000, the deposit is only going to get the price to $900,000. The developer will still be expecting a million, so “the seller will need to pay the buyer $100K and cover that difference,” Zadegan said.

In other words, most buyers are better off to find a way to close on the unit and then flip it on completion. It’s easier to sell a completed proudct a buyer can walk through than selling a piece a paper. When you look at it through that lens it makes sense why assignment listings are plunging.

The question then becomes how big will the losses be.

In some extreme cases, it’s nearly seven figures.

Despite some sellers willing to take million dollar losses, there hasn't been a single MLS resale in the Butterfly building since they started closings over a year ago.

This one has been listed on the market for 116 days at $1,688,000. It closed for $2,469,900 in Decemebr 2024.

There’s another one here at $1,698,000 that originally closed for $2,560,100 in July 2025.

Keep in mind, even if you can resell it for the same price you paid there’s still a 10% hurlde rate. (5% GST, 2% Property Transfer Tax, 3% Realtor commission).

These are extreme cases, but make no mistake, what’s happening in the new construction space is absolutely wild. The losses are compounding and that’s scarring a generation of investors. Those very investors are the ones responsible for supplying all the capital required for the half a million new homes the government has promised to deliver each year.

It’s no wonder housing minister Gregor Robertson never mentions what type of housing they intend to deliver, because it certainly won’t be housing you can purchase. The data doesn’t lie, by 2030 housing completions for new condos will hover near ZERO in both Toronto and Vancouver.

Houston, we have a problem.

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As expected the Bank of Canada remained on the sidelines this past week, opting to keep interest rates on hold, and will continue to do so, barring a significant shift in the economy.

Inflation pressures don’t appear to be a concern for the BoC, despite overall price levels suffocating the life out of many Canadian households.

“Turning to inflation, it averaged 2.1% last year, and has now been within the 1% to 3% band for two years. The Bank expects CPI inflation to stay close to the 2% target over the projection as tariff-related cost pressures are offset by excess supply.”

The Bank of Canada also flagged mortgage renewals, which are set to have a banner year. A record number of mortgage holders will renew their mortgage this year. According to the BoC, the median payment shock for 2026 sits near ZERO.

There’s just one problem with median and averages.

You can drown in a river that’s three feet deep on average.

Per research from Desjardins, the dispersion of outcomes is wide. In fact, mortgage renewals will hit hard for borrowers coming off their ultra low 5 year fixed rates from the depths of the pandemic. Simulations suggest five‑year fixed‑rate borrowers are bracing for ~20% payment shocks, while five-year variable‑rate, fixed‑payment borrowers could see even larger payment increases.

However, borrowers who renewed during the Bank of Canada’s hiking cycle and deliberately chose shorter terms are set to see a notable decline in monthly payments. Desjardins simulations suggest that payments for borrowers originally on three year terms could fall as much as 20%.

Ultimately, we dodged the worst of it. The mortgage renewal wave went from a tsunami to a modest ripple.

But it could have been a lot worse. Mortgage rates went as high as 6.5% and have now settled in at 4%. Banks have been proactively massaging amortizations. Effectively anyone who claimed financial hardship was allowed to re-extend amortizations without having to requalify. While others enjoyed a significant reduction in mortgage principal from the historically low rates.

Borrowers are getting used to life with 4% mortgages, but the housing market hasn’t.

Greater Vancouver home sales continued their slump into 2026. January home sales fell 29% year-over-year in January, and were a whopping 35% below the 10 year average.

The sales to actives ratio was just 9%, the lowest reading since September 2012. In other words, only 9% of homes available for sale during the month are actually selling, which ultimately means more price reductions are coming.

If you’re a home seller today you get to decide between liquidity or price, because you can’t have both. You can stick your heels in and wait for your price, or you can skate to where the puck is going and accept tomorrow’s price.

Those waiting for BoC cuts to stimulate demand have been left disappointed. There appears to be no further relief coming from the BoC, nor OSFI for that matter.

Despite industry chatter that OSFI (the banking regulator) would replace the stress test with its loan to income test, OSFI decided this past week to keep both the LTI test, and the stress test in place.

“Following its pilot, OSFI has determined that loan-to-income (LTI) limits lessen the build‑up of highly leveraged residential mortgage borrowers, which in turn reduces systemic risk. Therefore, LTI limits will remain in place.”

“At this time,” OSFI will leave the stress test in place as a “complement” to LTI limits, says OSFI Executive Director of Policy and Risk, Theresa Hinz.

So there you have it.

The housing market remains on life support, desperate for a demand boost. The reality is buying a house is a major purchase and you’re less likely to make a move when the media is spinning up headlines suggesting an imminent invasion from the United States.

Nothing freezes a housing market like uncertainty.

If anything is going to turn the tide on the demand side it will have to come from an extension of CUSMA sometime this summer. Until then, nervous buyers will take their time, anxiously awaiting positive headlines so they can dip their toes back into the pool. That can only be derived by mending relations with our largest trading partner.

Let’s watch.

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Last week we wrote a piece titled ‘Plan B’ in which we highlighted the flood of rental supply driving rents lower. Much of this has been derived from developers shifting new projects from pre-sales to rentals amidst the sudden disappearance of investors.

We already knew the pre-sale market was bad, but even we were surprised by the latest figures reported by Altus Group.

New home sales in the GTA hit a record low for the year in 2025, hitting their lowest totals in 45 years!

There were just 5314 new units sold in 2025. The lowest levels on record since they started collecting data, and 81% below the ten year average. Just for context, the population of the GTA has grown by more than 3 million people during that time, so the numbers are even more alarming when adjusting on a per capita basis.

The inventory of unsold new homes in the GTA stood at a whopping 26 months at the end of December, and prices have now fallen as much as 25% in the single family segment, and 18% for condos.

What’s not yet noted here is of the 5314 sales recorded in 2025, not all of them are going to get built. Just because these units are “sold” doesn’t mean the developer has sold enough units in the project to secure construction financing. In other words, expect a good chunk of these sales to get cancelled and the deposits returned to the buyer.

The GTA pre-sale market is so bad that housing completions are going to hover near ZERO in 2029 and 2030. No new housing will be delivered in 2029 and 2030.

The implications are obvious.

“New home sales are down well into the double digits across the province, putting 100,000 jobs at risk in Ontario alone,” said Justin Sherwood, Chief Operating Officer at BILD. “To find a comparable collapse in new home construction, you would probably have to look back to the 1940s. New home construction is a cornerstone of our economy, yet it has effectively stalled.

Things aren’t much better here in Vancouver.

New condo sales in Metro Vancouver just had their worst year in a long time. Sales plunged 62% from last year and are down a whopping 85% from peak levels in 2021.

Altus group has only been tracking the data in Vancouver since 2017 so we’re at a 9 year low, and probably more.

There are no signs of a turnaround in sight. This is an extinction level event for a lot of condo developers.

One of the big challenges is that the cost of delivering new housing is simply too high. From taxes and city fees to raw materials and interest rates, the growing gap between what it costs developers to build and what buyers are willing to pay is simply too large.

Let me give you a simple example.

In the Brentwood area of Burnaby, which is littered with high-rise towers, developers have been selling new product more recently at about $1300/sqft. Developers will typically target a 15% profit margin. So let’s assume you build the project for free and reduce your profit margin to zero (unlikely but one can dream). That brings the cost of delivery to $1100/sqft, plus GST = $1160/sqft.

Here’s the problem. Comparable re-sale product in the area that is a couple years old is now trading between $900-1000/sqft, and falling! The resale product is repricing faster than developers can or are able to adjust. In essence, there’s about a 20% premium for brand new pre-sale. It’s true pre-sales haven’t made financial sense for awhile, but buyers have finally figured that out.

Because of this discrepancy, there will be no recovery in the pre sale market this year. I think we are reaching the point where we will see new measures coming from the government to address the collapse in the new construction space.

After all, PM Carney pledged a major, rapid expansion of Canadian housing construction, targeting nearly 500,000 new homes annually.

Don’t laugh.

Policy changes cometh.

Let’s watch.

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