The Bank for International Settlements doesn't usually make headlines. It's the central bank for central banks, a 63-nation institution that produces reports most people never read. But its latest housing data landed differently. According to BIS's Q3 2025 figures, Canada recorded the steepest inflation-adjusted home price decline of any major advanced economy in the world, tied only with China at five per cent year-over-year.

That's not a minor stat. That's a ranking you don't want to top.

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From Pandemic Peak to This

To understand where we are, you have to go back to Q1 2022. That was the moment. Every Canadian market seemed to be on fire, bidding wars were the norm, and the national average home price had just hit a record. Then the Bank of Canada started hiking rates. Fast. Rates went from 0.25 per cent to five per cent in one of the most aggressive monetary tightening campaigns the country had ever seen.

What followed was a correction that's still playing out. From that peak through January 2026, national prices are down roughly 19 per cent in nominal terms, according to BMO economist Robert Kavcic. In real, inflation-adjusted terms, the BIS puts the decline at 18 per cent since Q1 2022.

For context, China, in the middle of its own serious property crisis, fell 17.8 per cent over the same period. South Korea dropped 6.8 per cent. Germany 6.2 per cent. The US and UK? They went the other way, with prices rising 12.3 and 8.9 per cent respectively.

Canada didn't just decline. It led the decline.

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It's Not a Collapse. But It's Not Fine, Either

Here's where the nuance matters, and where a lot of commentary gets it wrong in both directions.

The national numbers are dragged down by Ontario and British Columbia, the two markets that ran hottest during the pandemic and are now paying the steepest price for it. Outside of those markets, the picture looks quite different. Quebec, Saskatchewan, Manitoba, and Atlantic Canada held up reasonably well in 2025. Quebec City's MLS Home Price Index surged 17 per cent year-over-year, which tells you that "Canada is crashing" is too blunt an instrument.

But nationally, the trend is undeniable. The Canadian Real Estate Association called 2025 a "quiet" close. Sales for the year fell nearly two per cent, and the composite price was down four per cent in December compared to the year before.

And prices haven't found a floor yet. Karl Schamotta, chief market analyst at Corpay Currency Research, put it plainly: Canada is "in the grip of one of the deepest housing downturns in the advanced world" with "little sign of stabilizing."

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Why Canada Fell So Hard

A few things compounded on each other here.

The run-up was enormous. Canadian home prices rose nearly 50 per cent between 2010 and Q3 2025 in real terms, even after the recent correction. That kind of gain over that period wasn't organic demand. It was speculation, ultra-low borrowing costs, and a housing policy environment that treated homes primarily as investment vehicles.

The rate hike was brutal. Going from 0.25 to five per cent is not a gentle correction. It was shock therapy for a market that had been on easy money for years. Buyers evaporated. Sellers who couldn't wait became motivated. And a lot of the fringe demand that had been borrowing at the edge of its limits got priced out entirely.

Then came the broader economic headwinds. Weak population growth. Cost-of-living pressure that's kept consumer confidence depressed. A sluggish economy that's made people cautious. TD Economics' Rishi Sondhi described the market as "subdued" since last August, and flagged that 2026 is likely to be another soft year given those headwinds.

The tariff uncertainty from early 2025 added another layer. Markets like London, Ontario and Edmonton saw new home prices trend down partly due to US-Canada trade tension, which hit confidence in regions tied to manufacturing and trade.

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What This Means If You're Buying or Selling

If you're a buyer, you have more power than you've had in years. Supply has improved in most markets, competition has cooled, and sellers have recalibrated their expectations. That doesn't mean prices are about to fall another 20 per cent. In many markets, they've already found a reasonable equilibrium. But the frenzied conditions that defined 2021 are gone, and negotiating is back.

Rate cuts from the Bank of Canada have already taken some pressure off. The question is whether they'll cut further. Most economists think the current rate cycle has probably bottomed out, which means the era of cheap-money speculation isn't returning anytime soon.

If you're a seller, honesty matters more than hope right now. Overpriced listings sit. Properties priced correctly for where the market actually is move. The buyers who are active are educated, have seen the BIS headlines, and they're not going to panic-buy at 2022 prices.

If you're already in the market and holding, the 50 per cent gain since 2010 didn't disappear. It corrected. Even with the decline, most long-term owners are still sitting on substantial equity. The pain is concentrated in people who bought near the peak, in the highest-priced markets, with the tightest margins.

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A Note on Kelowna and the Okanagan

Regional context matters here. Kelowna isn't Toronto. The Okanagan operates on different dynamics, driven by lifestyle migration, retiree demand, and a mix of primary and secondary home buyers that doesn't behave identically to Ontario's commuter belt.

That said, BC is one of the provinces where prices have declined, and the broader market sentiment affects buyer confidence everywhere. Anyone telling you Kelowna is completely immune to national conditions is being optimistic in an unhelpful way. But anyone telling you it's in freefall is being equally inaccurate.

The reality, as it usually is, is more precise than either of those takes.

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The Bigger Picture

Canada's position at the top of the BIS decline rankings reflects a simple math problem. You can't have prices double in a decade based largely on cheap credit and speculation, then expect a soft landing when the credit gets expensive. What's happening now is a recalibration, painful as that is for some, toward a market that has to be justified by actual income and actual demand rather than the assumption that prices only go up.

The longer-term question is whether Canadian housing policy addresses the supply and structural issues that drove the bubble in the first place. If it doesn't, the next cycle risks repeating the same pattern once rates eventually ease enough to reignite demand.

For now, though, the market is what it is. Measured. Cautious. Looking for reasons to move, and waiting for something that feels like certainty again.

That's the environment buyers and sellers are navigating in 2026. And understanding it clearly, without the hype in either direction, is where good real estate decisions start.

Coldwell Banker Horizon Realty is a full-service real estate brokerage based in Kelowna, BC. If you have questions about how current market conditions affect your situation specifically, our team is happy to have a real conversation about it.