Canada's Housing Market Sees Sharpest Price Drop Among Major Global Economies
Canada's residential housing market has recorded the most significant decline in housing prices among comparable advanced economies, according to a new report from the Bank for International Settlements (BIS). The international banking institution, which serves 63 global central banks, revealed that inflation-adjusted house prices in Canada fell by five percent in the third quarter of 2025 compared to the same period a year earlier.
Global Comparison of Housing Market Performance
While Canada experienced the steepest decline, China also saw a five percent drop in residential prices during the same period. Finland followed with a four percent decrease, while other countries including New Zealand, Israel, Romania, Austria, and Hong Kong also recorded residential price declines. Overall, inflation-adjusted prices remained stable across advanced economies, according to the BIS analysis.
Looking beyond quarterly data, the report showed that Canadian home prices plummeted 18 percent in nominal terms from the first quarter of 2022 to the third quarter of 2025. This decline outpaced China's 17.8 percent drop during the same timeframe. South Korea experienced the third-largest decline at 6.8 percent, followed by Germany with a 6.2 percent decrease and Sweden with a six percent reduction.
In contrast, housing markets in the United States and United Kingdom demonstrated resilience, with prices rising 12.3 percent and 8.9 percent respectively over the same period.
Analyst Perspectives on Canada's Housing Downturn
Karl Schamotta, chief market analyst at Corpay Currency Research, commented on the BIS findings, noting that "Canada is still in the grip of one of the deepest housing downturns in the advanced world." He added that "after spectacularly outsized gains before and after the pandemic, home prices have fallen more sharply than in peer economies and are showing little sign of stabilizing."
The BIS report indicated that Canadian home prices had increased nearly 50 percent since 2010, following the great financial crisis through the third quarter of 2025. However, prices have declined since the fourth quarter of 2019, just before the pandemic began.
Historical Context and Recent Market Trends
The first quarter of 2022 marked both the peak and the beginning of the downturn for Canada's pandemic-era housing boom. During this period, the Bank of Canada initiated an unprecedented rate-hiking campaign, raising interest rates from 0.25 percent to five percent. This monetary policy shift significantly impacted a sector that had recently set records for national average prices.
Robert Kavcic, an economist at BMO Economics, noted that from the market peak to the latest January housing data, national prices have declined by 19 percent.
Recent data from the Canadian housing market reinforces that the frenzied activity characteristic of the early 2020s has subsided. The Canadian Real Estate Association (CREA) reported last week that the housing market "quietly" closed out 2025, with annual sales falling nearly two percent and the composite price declining four percent in December 2025 compared to the same period a year earlier.
Future Outlook for Canadian Housing
Economist Rishi Sondhi at TD Economics observed that Canadian housing has been "subdued" since August 2025, with multiple factors contributing to the slowdown. These include economic uncertainty, cost-of-living concerns, weak population growth, and a sluggish overall economy.
"With these headwinds in place, another sub-par year for the Canadian housing market is likely on tap in 2026," Sondhi stated in a research note.
The comprehensive BIS data and subsequent analysis from Canadian economists paint a clear picture of a housing market experiencing significant correction after years of rapid growth, with Canada leading advanced economies in price declines during the current economic cycle.
