Benefits of Buying Real Estate During a Recession

| Buying

To the untrained eye, the real estate market might seem random and unpredictable. As a result, when words like “inflation” and “recession” flash across headlines, home buyers start to retreat to the proverbial fence. Add to that words like “trade wars” and “tariffs,” and you might find yourself missing out on the unexpected benefits of buying real estate when the naysayers are filling your head with doom.

We’re here to remind you that the economic cycle has predictable patterns, and when home buyers with a steady income and secure finances know what to look for, they can find opportunities during a recession. Let’s take a look.

Understanding Economic Cycles and Real Estate

First, you need to understand how the economic cycle impacts real estate:

Sellers’ Delight: Expansion

Expansion is a seller’s market characterized by a thriving economy, low unemployment, and a surge in home buyers. Low vacancies are pumping up the competition, pushing prices higher. While inventory feels low, it’s more about the number of homebuyers. This is the most challenging stage for buyers because competition is fierce, and bidding wars become the norm. We’ve lived through this scenario for years, and it’s one of the main reasons so many Torontonians have been priced out of the real estate market in favour of the suburbs.

Buyer’s Ideal: Hyper-Supply

This is a buyer’s market with tons of homes but not many buyers to snap them up. House prices drop with less demand, leaving sellers nervous they will miss out on making a real profit, especially if they have to sell. Too many homes can also lead to lost jobs in the home-building industry as construction slows down, an awful addition when a recession is leading to job loss across multiple sectors.

Dreaded Recession

During a recession, there’s a higher risk of job loss and higher interest rates, which is bad for everyone. There is also something called a “technical” recession when we experience two consecutive quarters of declining inflation-adjusted Gross Domestic Product (GDP). However, in real estate, a recession is actually a balanced market. There are tons of homes to choose from, fewer buyers to fight with, and therefore lower prices. Whether you’re buying a home or an investment property, opportunity has arrived for those lucky enough to hold onto their jobs and continue to build their savings for a down payment. Investors are ready to pounce because rent covers expenses while they wait out the recession and then watch their equity grow as the economy recovers.

Economic Recovery

As we recover from a recession, we continue to enjoy a balanced market. However, while you might think a recovering market is the time to buy, as more people start feeling financially secure, demand rises. Therefore, as recovery progresses, your opportunity becomes more elusive. Although you’ll see interest rates drop, you have to time it right. The trick is to leverage negotiating power while inventory is high but before dropping interest rates lures more buyers onto the scene.

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Where We Were

We watched inflation rise at alarming rates post-pandemic, forcing the Bank of Canada to enter into a hiking cycle in March 2022. Ongoing increases to the overnight rate from the historic low of 0.25% were used to discourage consumer spending and reduce debt. However, increased interest rates saw the major Canadian banks’ prime rate peak at 7.20% by mid-2023 and hold steady straight through until December. Higher interest rates spooked buyers worried about higher monthly payments, so while higher interest rates helped both inflation rates and housing prices drop, we didn’t see a buying spree with delighted first-time buyers jumping off the fence to take advantage of lower housing prices. Instead, they stayed on the sidelines due to those high monthly payments.

We also saw more people forced to sell their homes and investment properties as mortgage renewals led to unmanageable monthly payments. The risk of mortgage defaults added to an already saturated market. In fact, the condo market suffered the most. The combination of high interest rates, tons of units, overproduction, and a cap on immigration proved too much for the condo apartment market to bear, leading to plummeting prices. The situation creates a good news/bad news scenario. On the one hand, reduced immigration and decreased investor demand helped bring down rental rates as competition fell, which was good for renters. On the other hand, reduced rental rates and high interest made renting the safer choice in the eyes of many GTA renters, keeping downward pressure on property prices, which was bad for condo owners wanting to sell. So we’ve got ideal condo prices, reasonable rates, and no competition, buyer-wise. So what happened to all the buyers? Tariff threats and a trade war.

Take a look at the past to learn more about the future! Read our blog about the past 10 years of the Toronto real estate market.

Where We Are Today

The ongoing tariff threats, trade war, and pending CUSMA negotiations have added to economic uncertainty. As we came out of the first quarter of 2026, we escaped the textbook definition of a technical recession, although experts seem to be divided on where Canada sits economically. According to Statistics Canada, a high level of imports negatively impacted the GDP but was also offset ⁠by a ⁠high accumulation of inventories. According to Dan Kelly, president of the Canadian Federation of Independent Business, most economic weaknesses are related to tariff threats, leaving Canadian businesses “in a holding pattern… treading water, hoping for brighter days.”
And home buyers are doing the same according to TRREB President Daniel Steinfeld. Strong spring sales compared to 2025 reflect improved affordability thanks to lower selling prices and borrowing costs. However, further improvements are expected as the year progresses, with positive news on the trade front being what buyers need to push the real estate market into a full recovery.

While no one can predict with absolute certainty what will happen in the future, past trends and experience can help us make informed estimates. Read our predictions for what the real estate market has in store for us this year.

Taking Advantage of a Recession

A recession offers a balanced market ideal for real estate investors and homebuyers with flexible budgets, reasonable down payments, and reliable, steady incomes. So a short recession can help keep housing prices down a bit longer without forcing the Bank of Canada to raise interest rates. According to TRREB Chief Information Officer Jason Mercer, with inventory levels trending lower and buyers maintaining negotiating power, current conditions can help:

  • Continue to drive affordability
  • See more buyers to help strengthen sales
  • Help prices level off, and
  • Stimulate growth as we enter 2027

What we’re seeing right now is the perfect trifecta of lower housing prices, fewer buyers, and sellers open to negotiation. That makes 2026’s looming recession a good time to buy. We do advise less financially secure buyers to proceed with caution: While the Bank of Canada is currently holding rates steady, if we do see a full-blown recession, when you renew your mortgage, you could see your interest rates increase. A rate increase could make your mortgage payments less manageable.

Looking for more buying strategies? Check out these posts next:

Your Recession Real Estate Strategy

Here are six buying strategies to help you buy in or around a recession:

  1. If interest rates seem high, calculate the costs between your interest rates and a lower purchase price to see if they make the mortgage payments more manageable.
  2. When housing prices are low and interest rates keep monthly payments affordable, consider putting your down payment towards a larger home or moving to a better neighbourhood.
  3. If you time things while interest rates are still reasonably low, buying secures higher equity because you pay less by avoiding recession-related interest increases while seeing housing prices rise as we come out of the recession.
  4. If interest rates feel too high during a recession, remember what goes up must come down during recovery, so when you renew your mortgage, your payments become more affordable, providing an opportunity to build your savings.
  5. If you benefit from a rate decrease during recovery, you can save the money for a lump sum payment at the end of the year to pay down your mortgage faster.
  6. Consider waiting until housing prices are just about to rise and interest rates have dropped during the early stages of recovery so you’ll have lower mortgage payments and still enjoy building equity faster.

The Bottom Line

Purchasing real estate is always about your budget and the risks you’re willing to take. Leveraging economic recessions and real estate market conditions requires a savvy real estate team to help guide your decisions to help you benefit from a recession both when you buy and as conditions change.

If you’re looking for the best Toronto real estate team to guide you on your real estate decisions, call The Christine Cowern team at 416.291.7372 or email us at hello@christinecowern.com. We’d love to work with you!