From the outside, the real estate market looks hesitant. Projects are being delayed, revisited, restructured.

At Laurentian Bank, conversations with developers and investors across all of Canada's major markets point to the same conclusion: the market has not stopped, but decision-making has fundamentally changed. ‘’Today's uncertainty triggered by conflicts and trade policies is not preventing projects from moving forward. It's forcing stakeholders to be more disciplined, more selective, and more strategic,’’ says Marco Millin, Vice President, Real Estate Financing at Laurentian Bank.

Capital has not stopped moving. It has shifted from ownership condominiums to purpose-built rentals, while industrial deals have gained ground. Lenders are heavily favouring rental and multi-unit assets — projects supported by demographic growth and properties aligned with housing-supply objectives, such as missing middle housing.

The shift isn't limited to new construction. ‘’For example, mortgage registrations in Quebec rose by more than 20 per cent in 2025 (1), driven by refinancing rather than acquisitions: debt restructuring, balance-sheet repair, conversion of private and short-term debt into traditional financing; and that’s no surprise. After peaking at 5.00 per cent in July 2023, the Bank of Canada policy rate now stands at 2.25 per cent as of September 2026 (2). That easing gave breathing room to buyers, owners and developers, even as construction costs remain high,’’ adds Marco Millin.

Financing is decided project by project

Financing conditions are no longer set at the market level alone; they're set project by project. As such, two buildings that look alike on paper can obtain very different answers today.

Financing conditions vary sharply between major urban centres and secondary regions, between purpose-built rentals and other asset classes, and between stabilized and value-added properties. Capital concentrates where liquidity, rents and exit-visibility are strongest. Weaker assets face higher spreads or tighter structures.

Lenders have recalibrated their risk appetite, particularly on debt ratios. The stress test remains, though, and caution persists around three types of files: speculative projects, less experienced borrowers or unconventional capital structures, and poorly positioned secondary assets.

‘’Lenders are lending. They're just expecting projects to be better structured, better capitalized and more realistic,’’ explains Marco Millin.

Why the new rules are here to stay

‘’The level of economic uncertainty has approximately doubled since the global reconfiguration has progressed under the shifting U.S. international policies and the compounded effects of wars disrupting the flow of commodities. Uncertainty is now one of the parameters a project must be built around. That shift should last," indicates Sébastien Lavoie, Chief Economist at Laurentian Bank Securities. Fortunately, solid demand for AI technologies outweighs wars and tariffs.

On the capital side, a rising global term premium, fueled mostly by governments’ increasing debt levels, is maintaining pressure on long-term financing costs. Even with policy rates down, long-term financing won't necessarily return to its previous-cycle cost. Exit visibility matters more as a result.

From a demand perspective, international migration is tepid in several markets. However, builders must not lose sight of the medium-term picture as population growth will resume in 2028-30. The need for housing hasn't gone away. It's been postponed. Also, young adults are staying with their parents or roommates for longer, putting off the move to a place of their own. But those households will eventually form. ‘’The labour market remains supportive, with unemployment among Canadians aged 30 to 49 sitting near 5 per cent (3) and employment growth remaining resilient,’’ adds Sébastien Lavoie.

Rental conditions are balanced in most Canadian markets, though, and some submarkets like areas in Vancouver and the North Shore of Montreal are seeing the number of vacant units climb. While national demand supports the sector, local demand is what carries a project.

What this asks of a lender

Within the context of this environment, a lender's role starts well before the financing request. Banks are increasingly looking beyond a project's initial financing needs and focusing on its long-term viability and exit strategy.

Increasingly, the role of a financial institution begins before a formal financing request is made. Developers are looking for guidance on project feasibility, financial forecasting, market assumptions and valuation expectations long before they seek capital.

At Laurentian Bank, we assist clients in assessing whether a project will work by reviewing forecasts, evaluating appraisals and testing assumptions under different market scenarios. In many cases, strategic adjustments to the structure, costs or timing can significantly improve a project's viability.

That analysis also calls for close knowledge of the market the project sits in. Rental dynamics, regulatory constraints and execution risk vary widely from one region and one asset class to the next. In construction especially, assessing a project means being able to read a schedule and a cost structure, not just a balance sheet.

That's why Laurentian Bank has built specialized teams across Canada's major markets with extensive knowledge of regional dynamics, regulatory nuances and asset-class-specific risks. Structuring financing around a project's trajectory rather than one need at a time also requires a firm understanding of the client's portfolio and anticipating upcoming refinancing cycles.

Currently, the market favours prepared borrowers and disciplined investors, while remaining demanding on risk quality. This is a cycle reset, one where financing becomes a strategic lever rather than an obstacle.

‘’In an uncertain market, moving forward doesn't mean seeing more clearly than everyone else. It means having built a file that holds up across several downside and upside scenarios and contains business agility as big global events unfold,’’ concludes Sébastien Lavoie.

Laurentian Bank: Laurentian Bank of Canada

Laurentian Bank works with real estate developers and investors across Canada's major markets, with dedicated teams in construction financing and commercial real estate. Our specialists can help you test a project's viability, structure its financing, and adjust its parameters.

The views and opinions expressed in this article are those of the individuals quoted and do not necessarily reflect the views of Laurentian Bank Group or any of its subsidiaries. The information contained herein is provided for informational purposes only and should not be considered financial, legal, accounting or tax advice. While reasonable efforts have been made to ensure the accuracy of the information at the time of publication, Laurentian Bank Group makes no representation or warranty, express or implied, regarding its accuracy, completeness or currency.

Sources:
1. JLR Land Title Solutions, 2025 Quebec Mortgage Market Report
2. Bank of Canada, Policy Interest Rate
3. Statistics Canada