27 May 2025
The prime minister says the question of whether home prices need to fall in Canada doesn’t have a “yes or no” answer. But others believe the spike in Canadian home prices over the past decade – with some markets seeing the average cost of a home jump by more than 100% – means there’s little chance of restoring housing affordability without a meaningful price correction.
Mark Carney’s response to the question, which arose after new housing minister Gregor Robertson said he didn’t believe there was any need for home prices to tick lower, came with a caveat: a buildup in supply will naturally lead to lower prices, at least after a time.
“Once we increase the rate of homebuilding as a country, then that is going to make home prices much lower than they otherwise would be, but that’s a medium-term effect,” he said.
Still, mortgage agent Ryan Sims believes government officials’ careful language on the question is symptomatic of a central problem in the housing market: an unwillingness to ruffle the feathers of homeowners who’ve profited handsomely from skyrocketing price appreciation.
“When we look at the key demographic that brought Carney and the Liberals into power again, it was that typical baby boomer that bought their house at a much lower price, has built up a lot of equity and has really counted or banked on this home equity for their retirement,” Sims told Canadian Mortgage Professional.
“So that’s the demographic that got them elected, and they do have to tread carefully about saying, ‘Yes, house prices need to come down.’”
He suggested even the government’s reluctance to say frankly that prices must fall indicated a disconnect with the struggles of younger Canadians. “It just kind of proves how out of touch the government is. Go talk to a first-time homebuyer or anybody under the age of 35 and ask them where home prices need to go. They need to come down,” Sims said.
Carney government unveils ambitious housing platform
Addressing Canada’s housing crisis was a key plank of Carney’s election platform, and the former central banker – who’s widely credited with helping Canada avoid the worst of the global financial meltdown in 2007-08 and steering the British economy through the shock caused by the Brexit referendum – has unveiled an ambitious agenda on that front.
Among those plans are a vow to double the pace of home construction, hitting a clip of nearly half a million homes a year, and earmarking $10 billion in low-cost financing and capital for builders of affordable homes.
Carney also says he’ll cut red tape in the construction process, slashing municipal development charges and reintroduce a tax incentive that boosted rental housing construction during the 1970s.
Meanwhile, a high-profile proposal made during the election campaign centred around lower taxes for first-time buyers – namely, the elimination of the Goods and Services Tax (GST) for buyers purchasing their home at or under $1 million.
‘If we’re going to build dog crate condos, that’s not a solution’
While most in the mortgage industry agree that the market is in dire need of more inventory, Sims said the government could have its work cut out following through on those promises, particularly with the pace of homebuilding remaining sluggish throughout the Trudeau years.
The current condo crisis enveloping Toronto – which has seen demand plummet for tiny units in the centre of the city – also underscores the need to make sure the right type of homes are being built, he added.
“I think we have to be asking ourselves: What are we going to build? If we’re going to build dog crate condos, that’s not a solution,” he said. “I don’t know anybody that I’ve talked to that’s looking to buy their first home that goes, ‘What I would love is 450 square feet on the 20th floor of a crowded downtown city and if you could throw in some high property taxes and a really big condo fee every month, that would be the cherry on top for me.’ Nobody says that.
“People want to own their own home. They want a backyard for their kids to play in, whether we go with the white picket fence out front or not. But people don’t want what we’re currently bringing to market, and I think that’s what’s happening in the Toronto market.”
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by checking back in with us on a regular basis and following us on all socials at @mymagnoliagroup!