Housing Activity Remains Weak in March 

The number of home sales recorded over Canadian MLS® Systems was virtually unchanged (-0.1%) on a month-over-month basis in March 2026.

“Home sales activity remained at lower levels in March, as rising global economic uncertainty, along with a mid-month jump in fixed mortgage rates tied to incoming higher inflation, piled on to an already shaky economic start to the year,” said Shaun Cathcart, CREA’s Senior Economist. “2026 is still expected to see a modest amount of upward momentum in sales and a stabilization in prices as some pent-up first-time buyer demand enters the market, but the forecast for the year has had to be revised downward. The timing of higher mortgage rates, along with the perception they may be temporary, could keep would-be buyers away at the most active time of year – April, May, and June – as they wait for rates to come back down.”

Clearly, the War in Iran, along with its unprecedented oil price shock, has spooked households and businesses, weakening overall economic activity, especially housing, which is highly interest-rate sensitive. Interest rates have risen sharply since the war began in late February, and it is uncertain how long higher oil prices will last. The reopening of the Strait of Hormuz is highly tentative, and it will take weeks, if not months, to return oil prices to pre-war levels.

The war’s timing couldn’t be worse, as it damages the usually strong spring home-selling season.

New Listings

New listings edged down a slight 0.2% on a month-over-month basis in March 2026. Lower monthly sales numbers so far in 2026 could in part be due to the fact new supply is running at the lowest levels since mid-2024.

With new supply and sales both little changed in March, the national sales-to-new listings ratio remained at 47.8%. The long-term average for the national sales-to-new listings ratio is 54.8%, with readings generally between 45% and 65% that are consistent with balanced housing market conditions.

“While the interest rate situation has recently changed, what could be a challenge for a buyer looking for a fixed rate mortgage may also be seen as more choice and less competition for those choosing a variable rate,” said Garry Bhaura, CREA’s 2026-2027 Chair. “Spring tends to be a busier time of year for the housing market, even if it may not be quite as busy as we were expecting not so long ago.”

There were 167,524 properties listed for sale on all Canadian MLS® Systems at the end of March 2026, up just 1% from a year earlier and 10.6% below the long-term average for that time of the year. Overall supply has generally been declining since May of last year.

There were five months of inventory on a national basis at the end of March 2026, unchanged from January and February and right in line with the long-term average for the measure. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

Home Prices

The National Composite MLS® Home Price Index (HPI) edged down 0.6% on a month-over-month basis in February, not a small decline but smaller than in January.

The non-seasonally adjusted National Composite MLS® HPI was down 4.8% compared to February 2025.

Bottom Line

With geopolitical tensions mounting and the tenuous ceasefire in Iran, potential homebuyers have postponed their purchase decisions. While there remains considerable pent-up demand, and home prices in many regions have fallen sharply, especially in Ontario, which was hardest hit by the tariffs last year and the ongoing condo supply glut. These issues are unlikely to be resolved in the near term so that housing market weakness will remain a drag on overall economic activity.

Compounding these concerns is the surge in oil prices. Gasoline prices–a very visible component of consumer spending–have skyrocketed, causing supply disruptions in nitrogen fertilizer, plastics, aluminum and helium. Price pressures will no doubt mount, leading central banks to be concerned about potential stagflation. Next Monday, we will see the CPI data for March. At this point, the Bank of Canada is likely to continue to “look through” the price pressures, hoping the war will end very soon.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Canadian employment rose by a moderate 14,100 in March after a tough start to 2026. Given that employment had plunged by a combined 108,700 positions in the first two months of the year, today’s data are far from strong, especially when full-time jobs actually nudged down a bit further last month. Still, even a small plus sign is a positive, as is the stable jobless rate, which held at 6.7% (a tick lower than a year ago).

The Canadian Jobs Report Showed a Small Gain in Net New Employment with the Unemployment Rate Steady at 6.7%

Confusion over a fragile ceasefire continued yesterday as Israel ramped up attacks on Lebanon. The Strait of Hormuz–a key oil shipping route whose closure has sent oil prices skyrocketing in recent weeks–reportedly remained closed. Normally, the Strait accommodates roughly 130 ships a day.

Tehran’s control of the Strait choked off a globally important conduit for oil and gas, as well as the flow of vital materials such as aluminum, helium, fertilizer, and oil components used to make many plastics. Canada is rich in crude and critical minerals, a growing power in liquefied natural gas, and an important supplier of fertilizer and aluminum to the US, though Trump’s tariffs on foreign metals have disrupted the latter industry.

A chunk of global oil production has been taken offline, which could have long-term implications, as the disruption to the free passage of ships through the Strait could linger. Many analysts believe it will take weeks to restore traffic in the Strait to normal levels. These supply disruptions are reminiscent of our COVID experience.

The US sees itself as the enforcer of the free passage of ships in international waters worldwide. If the US backs away from underpinning the free passage of goods, supply disruptions will accelerate.

It was with this backdrop that Statistics Canada released this morning’s Labour Force report. Employment was little changed in March (+14,100; +0.1%) following a cumulative decline of 108,700 (-0.5%) over the first two months of 2026. The number of full-time and part-time workers both showed little variation in March.

On a year-over-year basis, employment was up by 87,000 (+0.4%) in March, largely reflecting gains over the final four months of 2025.

The employment rate—the proportion of the population aged 15 and older who are employed—was unchanged at 60.6% in March, following a cumulative decline of 0.3 percentage points in January and February. The employment rate in March was just above the recent low of 60.5% recorded in August 2025 and was down 0.3 percentage points year over year.

In March, there was little variation in the numbers of public- and private-sector employees and self-employed workers. On a year-over-year basis, the number of employees grew at a faster pace in the public sector (+1.2%) than in the private sector (+0.6%).

The unemployment rate was unchanged in March at 6.7%, following a 0.2-percentage-point increase in February. The unemployment rate was below the peak of 7.1% recorded in August and September 2025 and was little changed year over year. In comparison, the unemployment rate averaged 6.0% from 2017 to 2019, before the COVID-19 pandemic.

Among people who were unemployed in February, 15.2% found work in March. This was similar to the rate recorded in the same months in 2025 (14.7%) but was below the pre-pandemic average of 19.1% for the same months from 2017 to 2019 (not seasonally adjusted). This indicates that higher unemployment rates relative to the pre-pandemic period are mostly driven by slower hiring, rather than by increased layoffs.

The participation rate—the proportion of the population aged 15 and older who were employed or looking for work—was unchanged at 64.9%. On a year-over-year basis, the labour force participation rate was down 0.4 percentage points.

Average hourly wages surged unexpectedly to a 4.7% y/y pace, the fastest in more than a year and well up from 3.9% the prior month. Wages can be a volatile series, but that’s a big bounce, and a move that the Bank of Canada will be watching closely. Meantime, total hours worked edged up 0.2% m/m after a deep dive in February. That still left hours worked down by 0.4% annually for all of Q1. The current consensus forecast for real GDP growth of 1.5% now hinges on an improvement in productivity growth.

Employment rose in ‘other services’ (+15,000; +1.9%) in March, offsetting a similar-sized decline in February. Employment in this industry, which includes repair and maintenance services, was little changed compared with 12 months earlier.

Employment change by industry, March 2026

Employment in natural resources also increased (+10,000; +3.0%), with nearly half of those gains coming from Alberta (+4,500; +3.2%). On a year-over-year basis, employment in this industry was little changed at the national and Alberta levels.

On the other hand, employment in finance, insurance, real estate, rental and leasing fell by 11,000 (-0.8%) in March, the first significant monthly decline since November 2023.

Although employment in health care and social assistance was little changed in March, it was up 94,000 (+3.3%) compared with 12 months earlier, the largest employment growth among industries. Over that same period, the largest employment decline among industries was in manufacturing (-44,000; -2.4%).

Bottom Line

In other news, the US CPI for March, released this morning, surged the most in nearly four years as the war with Iran sent gasoline prices skyrocketing. The CPI spiked 0.9% from February. Year-over-year inflation increased to 3.3%, the strongest pace since 2024. A record rise in gasoline prices was responsible for nearly three-quarters of the monthly advance. Core inflation rose at a slower 0.2% pace monthly pace.

The data underscore how the war in the Middle East is beginning to ripple through the global economy, worsening households’ affordability woes. Gas prices have already surged at the pump, and, according to Bloomberg News, service providers, including Delta Air Lines and the US Postal Service, have warned of price hikes ahead.

The Canadian CPI data for March will be released on Monday, April 20, before the April 29 Bank of Canada announcement. The data will undoubtedly show a spike in price pressures, but given the geopolitical uncertainty regarding how long the disruption to oil tanker traffic will last, the Bank of Canada is likely to keep its powder dry at the next meeting. There is a real risk of stagflation, so inaction is the likely outcome, for fear of worsening tepid economic growth in response to what everyone hopes is a temporary surge in oil prices.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Bank of Canada Holds Policy Rate Steady

Today, the Bank of Canada once again held the policy rate steady at 2.25%. This is the bottom of the Bank’s estimate of the neutral overnight rate, where monetary policy is neither expansionary nor contractionary. With inflation hovering just under 2% and core inflation falling to 2.3%, the Governing Council sees the current overnight rate as appropriate, as the Bank looks through the inflationary effects of the war in Iran.

Economic activity has slowed amid the 19-day-old war, with widespread supply disruptions. “Since the outbreak of the conflict in the Middle East, global oil and natural gas prices have risen sharply, and this will boost global inflation in the near-term. In addition to energy supply disruptions, transportation bottlenecks stemming from the effective closure of the Strait of Hormuz could impact the supply of other commodities, such as fertilizer. Financial conditions have tightened from accommodative levels. Global bond yields have risen, equity market prices have declined, and credit spreads have widened. The Canada-US dollar exchange rate has remained relatively stable.”

The labour market in both Canada and the U.S. remains soft. ” Employment gains in the fourth quarter of 2025 were largely reversed in the first two months of 2026, and the unemployment rate rose to 6.7% in February. Looking through the volatility, recent data also suggest ongoing weakness in exports. It’s too early to assess the impact of the conflict in the Middle East on growth in Canada.”

Bottom Line

The Bank of Canada has shown its willingness to bolster the Canadian economy amid unprecedented trade uncertainty. At the same time, Canada is working hard to establish alternative trading partners. Even the vast Chinese market cannot replace the US in terms of proximity and cost-effectiveness, given the high transport costs. China has stepped up its purchases of Canadian oil to record levels. There is no single market the size of the US market to replace exports of steel and aluminum, but the prospects of rising exports to Europe and Asia will help to offset the impact of US tariffs.

The War in Iran, now in its third week, has caused a monumental oil price shock as the Strait of Hormuz is virtually shut down. Other commodity prices have also risen sharply, including natural gas, aluminum, and fertilizer prices. Consumers and businesses are tightening their belts amid uncertainty about the war’s duration.

Housing market activity has been in a long, slow downward trend. Nominal home prices have fallen 20% from their peak in the second quarter of 2022. When accounting for inflation, real home prices are down 30%, providing an enormous opportunity for first-time homebuyers.

In this environment, market-driven interest rates have risen. The 5-year bond yield is once again attempting to break through 3%. The 2-year bond at 2.72% is well above the 2.25% overnight rate, and the Canadian dollar is rising. Lenders have recently increased fixed mortgage rates, which will be more popular if people generally expect rates to rise.

The key to the outlook is the continuation of CUSMA. We will likely suffer several more months of uncertainty before we know the fate of the trade agreement. In the meantime, PM Carney will continue to encourage trade deals in non-US countries.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Housing Activity Fell Again in Early February–Depressed by Record Winter Storm–Before Picking Up in Late February

Today’s release of February housing data by the Canadian Real Estate Association (CREA) showed the housing market slowed further at the start of the month, reflecting the lingering effect of January’s snowstorm. Activity picked up in the second half of the month, a positive harbinger of a spring rebound.

The number of home sales recorded over Canadian MLS® Systems fell 1.3% on a month-over-month basis in February 2026, following a 5.8% decline in January.

“February saw a continuation of the quieter levels of activity recorded in January, although there was some indication things were starting to pick up speed toward the end of the month,” said Shaun Cathcart, CREA’s Senior Economist. “2026 is still ultimately expected to be a story about pent-up first-time buyer demand finally seeing a chance to enter the market. They’ve had to wait a long time for mortgage rates to find a bottom, but some will no doubt continue to hold off for a bottom in prices in some Ontario and British Columbia markets.”

New Listings

New listings fell back by 3.9% on a month-over-month basis in February 2026, erasing the jump recorded in January.

With new supply down by more than sales in February, the national sales-to-new listings ratio tightened to 47.6% compared to 46.4% in January. The long-term average for the national sales-to-new listings ratio is 54.8%, with readings roughly between 45% and 65% generally consistent with balanced housing market conditions.

“Housing market activity in February remained slow, particularly in the stretch of Ontario between Windsor and Toronto,” said Valérie Paquin, CREA Chair. “That said, the main event never really gets going until around April, so there’s still time to get ready to buy or sell this year.”

There were 151,850 properties listed for sale across all Canadian MLS® Systems at the end of February 2026, up 3.7% from a year earlier but 12.3% below the long-term average for that time of year.

There were five months of inventory on a national basis at the end of February 2026, unchanged from January and right in line with the long-term average for the measure. However, the national average masks wide regional differences, with no province currently at that level and only a handful of local markets close to it. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

Home Prices

The National Composite MLS® Home Price Index (HPI) edged down 0.6% on a month-over-month basis in February, not a small decline but smaller than in January.

The non-seasonally adjusted National Composite MLS® HPI was down 4.8% compared to February 2025.

Bottom Line

The chart below shows that, just as Canada had a record housing rally during the pandemic, it is leading the housing correction. Canadian home prices are down 18% from their peak in the first quarter of 2022, when the Bank of Canada took the overnight rate down to a mere 25 bps. Currently, the policy rate is 2.25%, down from 5.0% at the peak of the tightening cycle. Back then, ultralow interest rates drove home prices to surge, particularly in smaller cities where remote workers fled to take advantage of a lower cost of living.

There is considerable pent-up demand among potential first-time buyers who will likely dip their toes in the market once winter passes. This year, we also see a record volume of refis and renewals, which will increase monthly mortgage payments and dampen household purchasing power. Affordability remains a challenge for first-time buyers, but mortgage rates and prices are considerably lower than a year ago. A reawakening of housing activity is likely as the spring market approaches, even with the war in Iran.

To be sure, the recent oil price shock has boosted market-driven interest rates as inflation fear mounts. Yesterday’s release of the CPI data shows that Canada’s inflation rate fell sharply before the war began. How much further inflation might rise will depend on the length of the war and the subsequent time it will take to reopen the Strait of Hormuz.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Canadian Inflation Falls More Than Expected to 1.8% in February

Canada’s inflation rate slowed by more than expected last month, before the oil shock of the Iran war. The yearly inflation rate fell to 1.8% in February from 2.3% in January, Statistics Canada reported on Monday.

Justin Trudeau introduced a temporary GST/HST break on a range of goods in January 2025, which expired in mid-Feb 2025. This raised the price level in February 2025, reducing inflation in today’s CPI reading. While the tax holiday initially drove annual headline inflation higher due to base effects, it’s now reversing and causing a deceleration that will likely be reflected in the March inflation data as well. This is very good news for the markets, particularly if the war with Iran comes to a relatively short conclusion.

Core inflation measures also eased by more than expected in February. The consumer price index excluding food and energy rose 2%, while the central bank’s trimmed and median measures of inflation both fell to 2.3%.

Shelter prices continued to decelerate last month, and were up just 1.5% from a year ago, the slowest pace in five years amid weak housing resales and smaller rent price increases.
Prices for food — a major sore spot for Canadian consumers — also rose at a slower rate. Yearly inflation for food purchased from stores was 4.1% in February, down from 4.8% the previous month. The deceleration was led by weaker price growth for frozen or fresh beef.
Still, grocery prices are up a cumulative 30.1% over the past five years.

Meanwhile, a more modest year-over-year deceleration in gasoline prices last month helped moderate the slowdown in headline inflation, with prices at the pump down 14.2% from 16.7% in January.

Gasoline prices were up 3.6% on a monthly basis, largely driven by higher oil prices ahead of the Middle East conflict and supply disruptions in some producer countries, Statcan said. Higher oil prices from the conflict in Iran are likely to show up in next month’s CPI data.

Bottom Line

It is very good news that the inflation backdrop softened last month, before the onslaught of the Iran war and the oil price shock. Some of the weaker base effects will be evident in the March CPI data as well, mitigating the impact of soaring energy and commodity prices on next month’s headline inflation number.

The Bank of Canada and the U.S. Federal Reserve will remain on the sidelines on Wednesday as a relatively quick end to the Iran war would keep a lid on inflation. President Trump has asked NATO countries to send warships to the Middle East to help open the Strait of Hormuz. The sooner the war ends, the sooner the oil price shock will dissipate. Given the uncertainty, the central banks will do best to keep their powder dry this time around, particularly given that labour markets in both countries have weakened substantially.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

This week I was invited to attend an exclusive session with SAGEN (formerly Genworth Canada) by one of my top Lenders, First National. The data they shared regarding the British Columbia housing market is eye-opening.

As we move into March 2026, the British Columbia real estate landscape is navigating a unique “economic crossroads.” To help you and your clients make sense of the current climate, I’ve distilled the most recent data from Sagen into five key pillars.

This is the “essential math” currently driving the BC housing market.

1. Economic Resilience Through Diversification

While trade tariffs and shifting U.S. relations are often in the headlines, BC’s economy has shown remarkable adaptability. Total exports now account for roughly 13% of Provincial GDP, but the destination of those goods has shifted. In just three years, reliance on U.S. exports dipped from 57.5% to 51.7%, while trade with Mainland China has grown to nearly 20%. This diversification serves as a vital buffer, providing the economic stability required to keep the housing market grounded.

2. The 30-Year Amortization “Bridge”

The 30-year amortization is no longer just an “option”—it has become the primary bridge for the BC middle class. Last year, 60% of all BC mortgage applications opted for a 30-year term. Most tellingly, 51% of those applicants would not have qualified for their home under a traditional 25-year schedule. This flexibility is the single most important tool currently keeping homeownership attainable for local families.

3. The High-Quality BC Borrower

Despite higher carrying costs, the BC borrower remains financially disciplined. The average Gross Debt Service (GDS) ratio sits at a healthy 29%, well within safety margins. Furthermore, our “New to Canada” segment—led by Surrey with 16% of total applications—is showing incredible strength, with 87% of these borrowers boasting credit scores over 700.

4. The $1.19M Reality

In British Columbia, the “million-dollar home” is no longer a luxury niche; it is the new benchmark for family housing. BC now accounts for 21% of all $1M+ mortgage applications in Canada, with the average purchase price in this segment hitting $1,190,000. To manage the monthly carry, 62% of these buyers are utilizing 30-year amortizations to balance their cash flow.

5. The Victoria & Urban Factor

The data highlights a significant “urban fortress” effect. In downtown Vancouver, for example, 100% of insured loans remain urban, supported by an average household income of $187,283. Meanwhile, in regions like Victoria and Surrey, we are seeing a “Bank of Mom and Dad” effect, with 23% of borrowers province-wide utilizing gifted down payments to secure their piece of the market.

The Bottom Line

We have officially shifted into a Buyer’s Market in many regions as inventory grows, yet prices remain stable over the long term. While we continue to watch federal immigration adjustments and trade tariffs, the combination of diversified income and high credit quality suggests a very solid foundation for the year ahead.

A mortgage is one of the largest financial commitments most people will make. Yet many borrowers focus only on interest rates instead of creating a long-term mortgage strategy. This article explains why homeowners and buyers across British Columbia work with Kimberly Coutts — the Mortgage Maven — when they want a thoughtful mortgage strategy that supports their financial goals.

1. Strategy Before the Mortgage Application

Many lenders focus only on getting a mortgage approved. Kimberly begins with a strategy-focused conversation to understand the client’s financial goals, lifestyle, and long-term plans. This approach ensures the mortgage is structured to support future plans rather than simply securing financing.

2. A Detailed Discovery Call to Understand Your Goals

Every strategy begins with a complimentary 30-minute discovery call. During this conversation, Kimberly reviews the client’s financial situation, risk tolerance, and comfort level with monthly payments. She also explains different mortgage structures and how they may affect the client over time.

3. Personalized Mortgage Solutions

No two clients have the same financial goals. Kimberly creates custom mortgage solutions that reflect each client’s income structure, long-term plans, and risk tolerance. This personalized approach allows borrowers to choose a mortgage that fits their life rather than adapting their life to a mortgage.

4. Guidance Beyond Interest Rates

Many borrowers focus only on finding the lowest interest rate. Kimberly believes the right mortgage product matters just as much as the rate itself. By analyzing amortization options, mortgage terms, and repayment strategies, she helps clients reduce their overall interest costs over time.

5. Access to a Wide Range of Lenders

A bank can only offer its own mortgage products. As a mortgage broker, Kimberly works with banks, mortgage finance companies, and alternative lenders. This wide network allows her to match clients with mortgage products that best support their financial strategy.

6. Clear Education Throughout the Process

Mortgage decisions often involve complex financial concepts. Kimberly focuses on explaining each option clearly so clients understand how different mortgage structures will affect their finances today and in the future.

7. Long-Term Mortgage Planning

A mortgage strategy should evolve as life changes. Kimberly maintains long-term relationships with her clients and provides annual mortgage checkups to ensure their mortgage continues to align with their financial goals and circumstances.

8. Proven Experience and Trusted Guidance

With more than 10 years of experience and over $100 million in funded mortgages, Kimberly has helped more than 225 families navigate important mortgage decisions. Her reputation for being professional, thorough, and efficient is reflected in 135 five-star Google reviews.

For buyers and homeowners who want more than just a mortgage approval, the right strategy makes all the difference. Kimberly Coutts — the Mortgage Maven — provides the expertise, planning, and personalized guidance needed to build a mortgage strategy that supports long-term financial success.

The Canadian Economy Shrinks by 0.6% in Q4, Owing to a Decline in Business Inventories

Statistics Canada reported this morning that the Canadian economy contracted by 0.6% at a seasonally adjusted annual rate, a significant reversal from the 2.4% expansion posted in Q3. The weaker growth rate reflected a steep decline in business inventories, which was partially offset by increases in household spending, exports, and government capital spending.

Economists surveyed by Bloomberg were expecting a 0.2% annualized decline over the last three months of 2025, while the Bank of Canada projected flat growth.

As US tariffs weighed on Canadian exports for much of the year, real GDP increased by 1.7% in 2025, marking the slowest annual growth since the economy contracted in 2020 owing to the COVID pandemic. Lower exports, particularly to the United States, were the main contributor to the slower rise in GDP in 2025.

A preliminary estimate suggests real GDP remained unchanged in January, after increasing by 0.2% in December, slightly stronger than economists’ estimate of 0.1%.

Exports rose 1.5% in the fourth quarter, after increasing 0.9% in the third quarter. The growth in the fourth quarter was led by higher exports of unwrought gold and of unwrought aluminum and aluminum alloys. Despite the increases in the latter half of the year, exports fell 1.7% in 2025, as shipments to the United States did not fully recover following the drop in the second quarter.

Imports edged up 0.3% in the fourth quarter, as higher imports of computers, clothing and footwear, and metal ores were largely offset by lower imports of pharmaceutical and medicinal products. For the year, imports were down 0.4% in 2025, driven by the 2.9% decline in the third quarter.

The better-than-expected Q3 gain will not be sustained in Q4, as Statistics Canada’s advance estimate for October showed industrial gross domestic product fell at a -0.3% monthly pace.

The current overnight policy rate of 2.25% remains stimulative, but until the likely outcome of trade negotiations with the US is resolved, Canada’s economy will be on shaky ground. It is unclear whether the Canada-US-Mexico free trade agreement will be extended beyond this year. If not, Canada will be in for a significant trade policy redo as it seeks replacement markets for its exports.

Household spending rose 0.4% in the fourth quarter after declining 0.2% in the third quarter. Higher expenditures on rent and financial services in the fourth quarter were partially offset by lower spending on new passenger vehicles and alcoholic beverages, as overall expenditures on goods declined for a second consecutive quarter.

On an annual basis, household final consumption expenditure was up 2.3% in 2025, keeping pace with the 2.2% growth in each of the previous two years. The rise in 2025 was led by increased household spending on financial services and rent.

Total capital investment rose 0.8% in the fourth quarter, driven by increased government investment in weapons systems. In contrast, business capital investment edged down 0.1% in the fourth quarter, as both residential and non-residential investment decreased. These declines were moderated by increased business investment in machinery and equipment, primarily computers (+19.6%) and intellectual property products, namely software (+0.7%).

Annually, total capital investment increased 1.4% in 2025, led by higher government investment in weapons systems (+45.9%) and engineering structures (+6.7%). Business investment rose 0.3% in 2025, as higher residential construction (+1.0%) and non-residential construction (+1.6%) were largely offset by weaker investment in machinery and equipment (-3.5%). The year 2025 was the third consecutive year in which government capital investment contributed more to GDP growth than business capital expenditures.

Business residential investment declined in the fourth quarter, led by decreased ownership transfer costs (-2.4%), a measure of resale market activity, and lower renovations (-1.3%). New construction (-0.5%) also declined in the fourth quarter due to lower work put in place for single- and apartment units.

Higher business residential investment in 2025 represented the first annual increase since 2021, as increased new construction (+1.0%) and renovations (+2.7%) more than offset the decline in ownership transfer costs (-3.4%).

Bottom Line

While weaker-than-expected Q4 GDP figures might normally trigger an easing move by the Bank of Canada, the Governing Council has made it very clear that it remains concerned about inflation. Tariff uncertainty is especially high now that the Supreme Court has found the Trump administration misused the International Emergency Economic Powers Act (IEEPA) to impose sweeping, open-ended tariffs — striking down the legal foundation for a central pillar of the administration’s trade strategy.

The decision removes the fastest way to impose broad country-level duties, but it does not end the tariff debate. Other statutory authorities remain in play, and businesses and trading partners are left to assess what comes next.

The ruling also lands amid sustained political pressure around affordability, which may shape how aggressively trade tools are redeployed. Even if tariff rates decline, businesses must now assess whether alternative authorities will be used to reimpose them. For the real economy, restoring stability may matter as much as reducing tariffs themselves.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Housing Activity Fell Again in January–Depressed by Record Winter Storm 

Today’s release of January housing data by the Canadian Real Estate Association (CREA) showed the housing market frozen solid by the record winter storms. Both home sales and prices continued their downward trend, but have yet to attract the beleaguered first-time homebuyer.

The number of home sales recorded over Canadian MLS® Systems fell 5.8% on a month-over-month basis in January 2026.

“The monthly decline in national home sales was driven primarily by less activity in the Greater Golden Horseshoe and Southwestern Ontario, suggesting that the story was probably more about a historic winter storm than a downshift in demand,” said Shaun Cathcart, CREA’s Senior Economist. “Notwithstanding the chilly start to the year, we continue to expect 2026 will ultimately be defined by pent-up demand from first-time buyers finally seeing a chance to enter the market.”

New Listings

Similar to what happened in January 2025, new supply increased month over month in January 2026, rising 7.3% as sellers appeared eager to start the year.

The burst of new supply was driven by about two-thirds of local markets, and led by Montreal, Quebec City, Calgary, Greater Vancouver, and Victoria. Meanwhile, Central and Southwestern Ontario were far less prominent and, in many cases, recorded declines. This reinforces the view that winter weather was a primary factor in January in those regions, as it appears to have suppressed both demand and supply.

With a rare combination of a sizeable increase in new listings and a sharp slowdown in sales in January, the national sales-to-new listings ratio dropped to 45% compared to 51.3% at the end of 2025. The long-term average for the national sales-to-new-listings ratio is 54.8%, with readings generally between 45% and 65%, consistent with balanced housing market conditions.

There were 140,680 properties listed for sale on all Canadian MLS® Systems at the end of January 2026, up 4.5% from a year earlier but 11.4% below the long-term average for that time of year.

There were 4.9 months of inventory nationally at the end of January 2026, up from 4.6 months at the end of December. The long-term average for this measure of market balance is five months of inventory. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

In line with more supply and less demand in January 2026, the National Composite MLS® Home Price Index (HPI) fell by 0.9% on a month-over-month basis.

The non-seasonally adjusted National Composite MLS® HPI was down 4.9% compared to January 2025.

Regionally, prices remain down year over year in British Columbia, Alberta, and Ontario, offsetting gains in other provinces. An analysis by city shows the largest year-over-year declines dip into double digits in Hamilton-Burlington and Oakville-Milton, contrasted with double-digit gains in Sudbury, Quebec City, and St. John’s, Newfoundland.

Home Prices

Regionally, prices remain down year over year in British Columbia, Alberta, and Ontario, offsetting gains in other provinces. An analysis by city shows the largest year-over-year declines dip into double digits in Hamilton-Burlington and Oakville-Milton, contrasted with double-digit gains in Sudbury, Quebec City, and St. John’s, Newfoundland.

Bottom Line

Today’s data end a year that saw house prices drift lower despite falling interest rates, as a simmering trade war with Canada’s largest trading partner caused higher unemployment and considerable job uncertainty. Although U.S. tariffs affect only a limited volume of Canadian goods, and the economy hasn’t tipped into a recession, the unpredictability of President Donald Trump’s trade policy has stoked economic insecurity.

In some regions, the price decline has now wiped out a sizable share of the gains homeowners saw during the torrid Covid market from 2020 to 2022, when overnight interest rates were reduced to a record low of 25 basis points. Back then, ultralow interest rates drove home prices to surge, particularly in smaller cities where remote workers fled to take advantage of a lower cost of living.

There is considerable pent-up demand among potential first-time buyers who will likely dip their toes in the market once winter passes. This year, we also see a record volume of refis and renewals, which will increase monthly mortgage payments and dampen household purchasing power. Affordability remains a challenge for first-time buyers, but mortgage rates and prices are considerably below year-ago levels. A reawakening of housing activity is likely as the spring market approaches.

With inflation well-behaved, the Bank of Canada has the flexibility to cut the overnight rate further if the economy falters.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

CPI Inflation in Canada Fell A Tick to 2.3% Y/Y in January on Gasoline Price Decline

The Consumer Price Index (CPI) rose 2.3% on a year-over-year basis in January, following a 2.4% increase in December.

The gasoline price index was the largest contributor to the deceleration in headline inflation, with a larger decline in January than in December. Excluding gasoline, the CPI rose 3.0% in January, matching the December increase.

Indexes with year-over-year movements impacted by the temporary GST/HST break in January 2025 continued to put upward pressure on the year-over-year all-items increase in January 2026. Among the affected indexes, the CPI remained most affected by the acceleration in prices for restaurant meals, and to a lesser extent, by prices for alcoholic beverages, toys, and children’s clothing.

The core inflation measures decelerated further in January, with the BoC’s two favourite measures easing to their lowest levels in a year (see chart below).

Prices at the pump fell 16.7% year over year in January, after a 13.8% drop in December. The larger year-over-year decline was mainly due to a base-year effect. The index rose 0.5% month over month in January 2026, compared with a 4.0% increase in January 2025, when crude oil prices rose. Additionally, the partial reintroduction of the provincial gas tax in Manitoba in January 2025 is no longer impacting the 12-month movement.

For food purchased from restaurants, prices were higher in January 2026 (+12.3%) than in January 2025, when prices were lower due to the GST/HST break.

Similarly, prices rose on a year-over-year basis for other previously tax-exempt goods in January 2026, including alcoholic beverages purchased from stores (+7.9%), alcoholic beverages served in licensed establishments (+9.0%), toys, games (excluding video games) and hobby supplies (+8.7%) and children’s clothing (+6.3%).

Year over year, prices for cellular services decelerated in January (+4.9%) compared with December (+14.6%), reflecting a base-year effect after six consecutive months of upward pressure. On a month-over-month basis, prices declined in January 2026 (-0.8%) after increasing in January 2025 (+8.3%).

Prices for food purchased from stores rose 4.8% year over year in January, following a 5.0% increase in December. The slower price growth was mainly driven by a decline in fresh fruit prices (-3.1%) in January, after a 4.5% increase in December. Amid generally strong or stable harvests in producer regions, the largest contributors to downward pressure on prices were berries, oranges and melons.

Since early 2024, growth in shelter costs has slowed year over year. In January 2026, prices continued to decelerate, rising 1.7%. This is the first time in nearly five years that year-over-year shelter price growth has fallen below 2.0%. Slower growth in rents and mortgage interest costs drove the deceleration.

Rent prices rose at a slower pace year over year in January (+4.3%) than in December (+4.9%). Rent prices decelerated the most in Prince Edward Island (+0.2%) and Saskatchewan (+1.8%).

The mortgage interest cost index rose 1.2% year over year in January, following a 1.7% increase in December. This index has been decelerating since September 2023.

In January, prices rose at a slower pace in nine provinces than in December. Year-over-year price growth accelerated in British Columbia due to a base-year effect, as hotel prices declined on a monthly basis in January 2025 after increasing in December 2024, coinciding with a series of high-profile concerts in Vancouver.

Bottom Line

Although inflation pressures are dissipating, this report alone will not trigger a Bank of Canada rate cut when the Bank meets again on March 18. It is unlikely to move the Bank of Canada from the sidelines as it continues to evaluate how US tariffs are affecting the economy. The data suggest that Americans are paying the bulk of the tariffs.

The Bank of Canada’s preferred measures of core inflation decelerated, with the median gauge edging down to 2.5% from 2.6%, and trim falling to 2.4% from 2.7%.

What the Canadian economy needs is greater clarity on the future of the Canada-Mexico-United States (CUSMA) trade agreement. Reduced uncertainty is the key ingredient required for a rebound in housing activity, particularly in the regions of Ontario and Quebec hardest hit by the tariffs.

The central bank kept its policy rate at 2.25% last month for the second consecutive meeting and has signalled an aversion to juicing demand at this time. In a speech earlier this month, Governor Tiff Macklem warned that cutting interest rates amid a supply-side shock could stoke inflation.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca