Canada’s deflating housing bubble stymies wealth effect of booming stock market
By Fergal Smith
April 28, 20265:03 PM GMT+7Updated April 28, 2026
Real estate sings in Toronto
A for sale sign is displayed outside a home in Toronto, Ontario in Toronto, Ontario, Canada December 13, 2021. REUTERS/Carlos Osorio/File Photo Purchase Licensing Rights, opens new tab
Summary
Falling home prices reduce consumer spending and hurt sentiment, economists say
Stock market gains mainly benefit wealthiest Canadians, with limited impact on overall spending
Higher mortgage rates and oil price shock worsen housing downturn
TORONTO, April 28 (Reuters) – Canada’s housing market slump, the longest in recent decades, is straining household spending even as a record high domestic stock market generates hundreds of billions of dollars of increased wealth.
Canada was the only Group of Seven advanced economy to post a home price decline last year in nominal terms, the latest Bank for International Settlements data and Reuters calculations show, as many households renewed mortgages at borrowing rates well above pandemic-era lows and as slower growth in immigration reduced demand for housing.
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Less consumption due in part to lower housing prices could hinder Prime Minister Mark Carney’s efforts to revive Canada’s economy, which is also contending with a trade war started by the United States. Gross domestic product increased by 1.7% in 2025, marking the slowest pace in five years.
Canadian household net worth still rose by more than C$1 trillion ($732.9 billion) in 2025 to C$18.6 trillion, due mainly to appreciating financial assets as Canada’s natural resource-linked stock market posted the largest increase since 2009 and outperformed the main U.S. indices, benefiting primarily wealthy Canadians.
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But analysts see little evidence of a wealth effect where households, feeling richer, spend more, because housing tends to have more impact than stocks on people’s financial well-being and the effect is greater when prices fall.
“There is nothing more devastating than seeing your home price depreciate,” said David Rosenberg, chief economist and strategist at Rosenberg Research.
