What is a lustrum, you ask? A lustrum is a less common term for a period of five years. Its origins date back to ancient Rome and refer to a purification ceremony that took place every five years. The ceremony completed the census – counting the population for military and tax purposes. Play means to wash (is that why the English call the bathroom the toilet?) or to purify, which was the main purpose of the ceremony, including the sacrifice of animals by a censor. The Romans really lived in excess when they needed a reset or cleansing every five years.
As for my “seesaw” reference, the past half decade has seen rapid change from one direction to another. The market’s rapid moves – down in 2020, up in 2021, down again in 2022 – continued, and so on. So many rapid changes occurred in this short period of time, from one extreme to another, during which we all experienced a wide range of emotions driven by geopolitical and economic circumstances. Can this period be described as a time of great ‘pleasure’, as in the word lustrum? Hell yes! The desire for power, money and even a full life was under severe pressure in the first half of this decade. Remember all that “revenge spending” on our homes, luxury goods, dining out and of course travel?
I am not suggesting that we need a purge, although I do feel that we have just completed the first stage of the idiomatic seven stages of relationships with this age, moving out of the lust or passion stage and into the discovery or realization stage. The second half of the 2020s is a perfect time to start learning and uncovering the possibilities with greater clarity and stability, away from the challenges, complications and noise of the past five years. This creates new concepts, ideas and expressions.
Cleaning the real estate word
As a student of the real estate industry, I felt it was important to do my part to cleanse our industry of some of the words, myths and misconceptions that influenced the first half of the Roaring Twenties and will culminate in 2025.
Mortgage defaults
In early 2025, we heard a lot of talk about rising mortgage rates coinciding with rising default rates. In particular, borrowers who got mortgages below two percent in 2020 were expected to be shocked by their renewal payments when rates doubled. All those doomsayers shouted from the rooftops that homeowners would run away from their homes en masse in these circumstances.
CMHC just reported that The country’s national delinquency rates have fallen slightly in the second quarter of 2025 – the first decline in three years (although BC and Ontario were above the national average). Additionally, the lower the interest rates, the more principal is paid off, which is a bonus at renewal. And if that’s not enough to stop talking about mortgage defaults, let’s look at the numbers.
Year: 2021 / 2026
Mortgage: $500,000 / $417,965
Depreciation: 25 years / 25 years
Interest: 1.9% / 4%
Payment: $2,093.21 / $2,198.58
Term principal: $82,035.03 / $54,110.04
Incentives
In many parts of the country, the number of new homes is at an all-time low, and builders and developers are tired of being sidelined and want to get back into the market. History has a tendency to repeat itself, and builders and various levels of government have played a role in initiating new construction. Everything from development cost reductions, deferrals or rebates to eliminating HST on new construction for all buyers, not just first-time buyers. Builders can also influence the market with mortgage interest buydown, no-interest, no-payment second mortgages, closing cost credits, no-cost upgrades, lease-to-own programs and short-term rental guarantees for investors.
Unfortunately for us in Canada, banks don’t allow interest rate buydowns, but the calculations are compelling. On a $1 million mortgage, to reduce the interest rate by one percentage point – from four percent to three percent – the initial cost is $30,000 ($15,000 on $500,000), giving the buyer $536 in monthly savings for the five-year term. This is a great way to market affordability. Can you imagine if buyers could withdraw from their RRSPs tax-free to do this, or if sellers could offer this as an incentive when selling their home?
Creative financing
It’s time we explore more creativity when it comes to helping people enter and grow the real estate market, creating financial tools to avoid additional costs that hinder equity building and affordability.
For example, if there were a ‘market value second mortgage’ of 10 to 20 percent of the purchase price. Sellers or homebuilders could leave five percent in the deal; parents could put money into it; the transfer tax could be deferred and placed there; for new construction, part of the development costs and HST could be deferred and included in this second mortgage. If the value of this second mortgage was equal to 20 percent, the mortgage would be conventional, there would be no four percent insurance premium added to the mortgage, and PST would not apply to mortgage insurance ($1,600 on a $500,000 mortgage due at closing).
So how would this mortgage be paid, and how would it not burden the homeowner? The second mortgage is installment and interest free. The contributing entities would receive their money when the homeowner sells, and they share in the prorated appreciation. So if the property has appreciated 10 percent in value after five years and the homeowner sells, those with a mortgage will receive 10 percent on their share of the second mortgage.
Rental
There is a lot going on around the topic of rentals in 2026. Purpose-built rentals will continue to be a hot topic, but with more thoughtful unit mixes that target different demographics. Family units will be a marketing term; student rents may lose their luster if the number of foreign students is limited; and senior-oriented rental housing with a number of services – light healthcare, food service, cleaning services, etc. – will become increasingly important in bridging the gap between a retirement home and a long-term care facility.
Modular construction
Don’t quote me, but permanent housing in various forms has been around for over 10,000 years, so why would modular housing, which appeared in the early 1800s, be something we could adopt overnight? There are many naysayers who claim that modular homes have no legs. During the California Gold Rush, hundreds of homes were factory-made in the East and shipped west. In the 1830s, folding wooden houses were shipped to Australia from London, England, to house British emigrants.
Don’t wait, don’t miss it!
What can I say about these superlative statements as someone who directly benefits from a booming real estate market? Can we really say the last rites about “it won’t be long”? No more than the words ‘this house has a lot of potential’, ‘motivated seller’ or ‘fixer upper’. The market is just that – the market – the last bastion of pure and unadulterated supply and demand. One thing is certain: economic conditions can turn on a dime. An announcement in the first quarter of a trade deal or increase in tariffs on Canadian exports could move the housing market one way or another.
Is 2026 the recovery year?
I have always believed in the saying: “How you end the year is how you begin it!” We have witnessed some notable events in the housing market as 2025 approaches. New housing projects are coming onto the market, November sales have held steady rather than showing their usual seasonal decline, and monthly supply in some categories – particularly single-family homes – has fallen by 20 to 25 percent.
Shopping surveillance
It is also striking that impressions per sale have never been as low as they are now for the month of November. It’s a phenomenon where buyers become very familiar with the inventory and market nuances with the help of their agents. As a result, they make faster purchasing decisions. I call it ‘surveillance shopping’, which I think will continue to dominate the market in 2026.
On the question of whether we should relist or lower the price, I’m in the downsizing camp, because buyers are watching. Also, don’t turn down a sale with a conditional offer on the sale of the buyer’s home, especially if the home the buyer is selling is competitively priced on the market. A sale sends a message to those watching, which justifies the market price and can bring those waiting in the wings out of the shadows.
|What does the Bank of Canada tell us?
The Bank of Canada estimates the neutral policy rate to be between two and three percent nominal, which translates into mortgage interest rates that are “normal” by historical standards but well above the ultra-low levels of 2020-2021. In other words, the proverbial needle is starting to move in the right direction for the economy and the housing market on the nominal interest rate front, and we are currently in the lower range of neutral. Buyers who have been sidelined due to high borrowing costs are now starting to enter the market, and the need to scale up or enter the market is taking precedence.
One thing is certain: the Canadian economy is in need of a clean-up. As the economy proves resilient and begins a path to growth – however nominal at first – so will the real estate market. It always does.
Conrad Zurini has had a front-row seat to many facets of the real estate industry, with a focus on improving the overall customer experience. He is director of two real estate brokerages with more than 1,200 agents.
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