Deflation is bad for economies. That is why the typical standard for most central banks is a target inflation rate of 2%. This leaves a factor of safe Waiting for the real estate bottom Brandon Donnelly Feb 25 ShareSupport Deflation is bad for economies. That is why the typical standard for most central banks is a target inflation rate of 2%. This leaves a factor of safety in case you miss your target. Because if you target 0% and end up with a negative number, then you're in trouble. A negative number is significantly worse than moderate inflation. The principal problem with deflation is that consumers start expecting goods and services to be cheaper next month and stop buying non-essential items, creating a vicious cycle with prices. I think we are seeing this same psychology play out with real estate in Canada (though not in every local market). According to the above charts from the BIS, real residential property prices across Canada were down just over 5% year-over-year in Q3-2025. And since Q4-2019, they were cumulatively down 5.45% (but up ~45% since 2010 after the Great Financial Crisis). Right now, many buyers are waiting on the sidelines, just in case things get cheaper. But I expect things to stabilize and feel better toward the end of 2026 and into 2027. And once that happens, a different buyer psychology will come to the fore. Cover photo by Anthony Maw on Unsplash Charts from BIS Support Brandon Donnelly The daily blog for city builders Show you appreciate this writer, help support their work, and share in their growth over time by buying their writer coin. Support SENT VIA PARAGRAPHYou're receiving this because you've subscribed to updates from Brandon Donnelly. 2010 El Camino Real Office 2350 Santa Clara, CA 95050 Manage your subscription