Canada's housing market is facing an extraordinary contradiction. After years of government efforts to improve affordability, home prices are finally falling across major Canadian cities. But as sales volumes collapse, so does a significant source of government revenue.
British Columbia collected $3.33 billion in property transfer taxes during the 2021–2022 housing boom. For 2025–2026, that revenue is forecast to fall to approximately $1.75 billion, a staggering 47% decline.
And now, with Canada's housing market struggling, Ottawa is exploring two potentially significant policy shifts: increasing immigration and reconsidering the foreign buyer ban.
Prime Minister Mark Carney has indicated that Canada may eventually resume controlled population growth following substantial reductions to immigration targets. The federal government's upcoming three-year immigration plan could provide important clues about when that shift might occur.
Immigration has historically played a critical role in Canada's economic expansion. With an aging population and weak natural population growth, newcomers contribute significantly to labour-force growth, health
care, technology, entrepreneurship and government tax revenues.
But rapid population growth also places pressure on housing affordability, infrastructure and public services. Finding the right balance remains a central economic challenge.
Meanwhile, Canada's foreign buyer ban, introduced in 2023 and extended through January 1, 2027, is approaching another decision point.
Finance Minister François-Philippe Champagne has indicated that Ottawa is reviewing its options, raising questions about whether foreign purchasers could eventually return to Canada's residential housing market.
Could restrictions be relaxed specifically for newly constructed homes? Would international buyers return in meaningful numbers? And could additional demand help developers struggling with completed but unsold inventory?
The economic implications extend beyond property prices.
Real estate transactions generate provincial property transfer taxes, while qualifying new-home purchases generate GST revenue. Construction activity also supports employment, business investment and broader government revenues.
The housing downturn is particularly evident in Toronto, where benchmark prices have fallen approximately 28% from their peak, returning to levels last seen in September 2020. Vancouver's benchmark prices have also retreated to levels last experienced in 2021.
Canada's rental market is experiencing similar weakness. National asking rents have declined 4.2% annually, marking 24 consecutive months of year-over-year decreases. Vancouver's average apartment and condo rent sits at $2,741, its lowest September level since 2021.
Adding another layer of uncertainty is the Bank of Canada.
Despite weak housing activity, financial markets are increasingly anticipating higher interest rates. At the time of recording, markets assigned approximately a 60% probability to an October rate hold and an 84% probability to a hike by December.
Variable-rate mortgages remain attractive to borrowers, but the possibility of additional increases raises questions about how much interest-rate risk households are prepared to accept.
Canada now faces a difficult balancing act: improving housing affordability while sustaining economic growth, government revenues and future construction.
Could immigration policy and foreign buyer restrictions become part of the response to a prolonged housing downturn? And what would that mean for Canadian homebuyers, sellers, investors and developers?
The answers could shape Canada's housing market well beyond 2026.
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