Inflation: A Lot of Bark, Not Much Bite
If you're still losing sleep over inflation, rest easy. Headline inflation held at 1.7% in May. Sounds decent, right? But dig a little deeper, and you’ll find that a chunk of that inflation is—get this—driven by mortgage interest costs. Yes, the same interest rates the Bank of Canada sets are inflating the very metric they monitor. It’s like setting your own fire and calling 911 on yourself.
Strip that out, and real inflation is closer to 1.3%—comfortably within the BoC’s target range.
Add to that falling gas prices, softening retail and manufacturing sales, and plummeting business optimism, and you've got a pretty strong case for further rate cuts this summer.
🔍 Takeaway: Inflation isn’t the villain it once was. If job numbers and CPI stay tame, rate cuts could be back on the table as early as July.
Population Growth: Suddenly… Stagnant?
Canada’s population growth hit a stunning zero in Q1. That’s right—flatlined. The brakes are fully on thanks to policy changes affecting temporary residents and international students.
Ontario, Quebec, and BC even saw population declines, which hasn’t happened since the border closures of 2020. Meanwhile, Alberta’s still collecting interprovincial migrants like Pokémon.
This slowdown matters. Why? Because nearly all the rental demand in the past three years came from temporary residents. With that tap turned off and record-high rental starts underway, we’re staring down a rental glut.
The Rental Tsunami Is Coming
May saw nearly 12,000 rental units break ground—an all-time high. That’s nearly double the monthly net population growth.
With nearly 160,000 rental units now under construction (over 6.6% of current stock), expect vacancy rates to climb and rent increases to stall. Add new federal restrictions on asylum seekers and international permits, and the rental demand is only shrinking further.
🧠Real Talk: If you're a landlord banking on rent hikes to cover rising costs, you might want to rethink that math.
Homeowner Supply? Not So Much
On the flip side, single-family and condo builds are slowing—dramatically. Permit levels are scraping 1980s territory. And while rental construction is booming, homeowner construction has collapsed.
Condo sales are particularly alarming. Toronto pre-construction sales in May? Just 137 units. That’s not a typo—it’s the lowest May figure since we started tracking it.
This isn’t just a blip. It’s setting the stage for a significant undersupply of owner-occupied homes in the back half of the decade.
🔮 Long-Term Outlook: Renters may soon have options. Buyers? Not so much. Prices will eventually rebound from today’s discounted levels—especially for ownership housing.
Mortgages: The Fixed-Rate Comeback
Mortgage activity jumped 48% year-over-year as the “Great Canadian Renewal Boom” rolled on. But borrowers aren’t waiting for rate cuts anymore—they’re locking into 5-year fixed rates at the highest share since 2023.
Why the shift? Because rate fatigue is real. Many Canadians renewing today are facing $100/month increases per $100K borrowed, and they’re craving predictability.
Meanwhile, CMHC’s headline-grabbing increase of the insured loan limit to $1.5 million has fallen flat. Just 2% of new insured mortgages in Q1 were above $1M. It’s the policy equivalent of bringing a water gun to a wildfire.
Did the Market Just Bottom Out?
May home sales were up 3.6% nationally, thanks largely to a rebound in Ontario. Inventory is rising but still below historical norms, which means the market could tighten quickly if sales pick up.
Prices are showing mixed signals—up in Ontario and Quebec, down in BC and Alberta. But overall, we're down nearly 17.5% from peak and nearly 40% inflation-adjusted in some Southern Ontario markets.
This may well be the bottom.
🤔 Translation: The real estate bear may be going into hibernation. If you’re waiting to “buy the dip,” you might be standing on it.
Consumer Health: Bruised, Not Broken
More Canadians are missing payments. EI claims are up. Job vacancies are down. Financial stress is rising. But surprisingly, net worth actually ticked up in Q1, helped by a boost in financial assets and home values.
Debt burdens remain high, but Canadians still hold over $6.68 in assets for every $1 in debt. That’s a lot of cushion, even if it’s not evenly distributed.
Final Thoughts: Navigating What’s Next
We’re at an inflection point.
Rental markets are shifting fast. Owner-occupied housing is heading for a future crunch. Inflation is not the threat it once was, and interest rates may soon follow suit.
So what does this mean for you?
Whether you're considering refinancing, investing, upsizing, or just trying to make sense of it all—this is the time to be strategic. Not reactive.
📞 Let’s Chat About Your Situation
Every real estate and mortgage decision is unique. If you're wondering what this all means for your goals, let’s talk it through.
👉 Book a call with me to get tailored advice that fits your plans, not just the market headlines.
Data and insights referenced in this update are sourced from the June 2025 Market Report by Edge Realty Analytics and used with permission.
