The significant risk that tariffs pose to Canada’s economy casts a potentially dark shadow over the housing market. Any economic turbulence arising from tariffs would be felt by participants, whose confidence is critical to the stability of the housing market.
There’s considerable uncertainty about the likelihood of tariffs, and their size and timing as well as retaliatory measures and policy responses. The U.S. administration’s decision on Feb. 3 to pause on implementing blanket tariffs may prove to be just a temporary reprieve. Or, it could indicate a preference to avoid worst-case scenarios. Indeed, its announcement of a 25% tariff on all steel and aluminum imports a week later hints a more targeted approach to trade actions.
Therefore, assessing the outlook for Canada’s housing market at this juncture is like putting a price on a home before an earthquake—it’s hard to know what shape the structure will be in at the end of the day. Still, we highlight some of the key themes to watch out for, which will shape how the housing market performs in 2025.
Lower interest rates heat up demand
Aside from elevated—and likely persistent—risks the housing market’s story should be one of continued recovery in 2025. We would expect lower interest rates will reduce ownership costs and help unlock pent-up demand.
A growing inventory of homes for sale will grease the market’s wheels by giving buyers more options to choose from. These dynamics were set in motion in the second half of 2024 and have longer to run in the year ahead as we expect interest rates to fall further.
Recent changes to mortgage insurance rules will help first-time homebuyers enter the market. More flexible mortgage insurance terms for a home purchased with a down payment of less than 20% is likely to boost demand.
Strained affordability, immigration and uncertainty to keep buyers cautious
There’s room for property values to appreciate in a stable economic environment. But, we think any gains are likely to be limited overall—though the picture will vary across markets.
Strained affordability—despite easing somewhat—will continue to limit buyers’ capacity or willingness to bid up prices aggressively. A sharp slowdown in population growth as the federal government implements significant cuts to immigration, and unrelenting economic uncertainty will also temper upward price pressure.
A return to more normal activity levels
Barring a full-on trade war ravaging Canada’s economy, we project the number of resale transactions will rise 12% nationally to 551,000 units in 2025. This would mark a return to more normal levels of activity—about 7% above the average during the five years preceding the pandemic.
Little change in property values overall
Absent any major economic shock, we’d expect housing market demand and supply to stay balanced in the year ahead, yielding minimal price increases Canada-wide.
We project the national aggregate RPS Home Price Index to appreciate just 1.4% in 2025. That would be less than half the 2.9% increase in 2024.
Regional highlights
British Columbia: We expect the market to regain its footing this year with resales rebounding 16.5% to 86,800 units. This would come on the heels of two quiet years when resales averaged less than 74,000 units annually. We see affordability issues keeping prices largely flat—edging up just 0.9% from 2024.
Alberta: Markets in the province have sustained brisk activity and solid price growth in 2024 and we see this continuing for the most part of 2025. We forecast Alberta resales to rise 4.8% to 87,500 units and home prices to appreciate 4.1%.
Saskatchewan: Similarly, we expect solid momentum to persist. We think the number of resale transactions will climb 6.7% to 14,400 units. That would be close to the all-time high reached in 2021 (17,500). We see the RPS price index benchmark rising 2.9% to $370,200.
Manitoba: Recovery from the 2022-2023 correction got in full swing last year. Odds are it will remain this way in 2025. Our forecast has resales growing a further 8.9% to 17,200 units and prices appreciating 3.1% in 2025.
Ontario: The road ahead is likely to remain bumpy, but we believe lower interest rates will keep markets in the province on a recovery course. We forecast home resales to advance 12.9% to 204,300 units—still 7% below the average in the three years prior to the pandemic. We expect generally balanced market conditions and continued affordability challenges to contain price increases to a subdued 0.9%. Toronto area condo prices could lose further value in the face of a growing inventory of units for sale.
Quebec: Activity picked up solidly over the second half of 2024, which we think will largely carry on to 2025. We project resales to increase by 17.3% to 106,000 units, following a 19.1% advance in 2024. We see prices rising 3.9%, ranking Quebec as one of the stronger gainers among provincial markets.
Atlantic Canada: Our base case forecast calls for a further broad-based rebound in activity this year. We project home resales growth will accelerate in New Brunswick (10.5% to 10,500 units) and Nova Scotia (11.7% to 12,400 units), but remain largely unchanged in Prince Edward Island (5% to 2,100 units) and ease slightly in Newfoundland and Labrador (3.5% to 5,900 units). Our projection also has prices continuing to appreciate in 2025 in all Atlantic provinces but at slower rates, ranging from 1.5% in PEI to 4.1% in NL.
Risks from U.S. tariff threats
Any major economic disruption, such as widespread job losses resulting from trade tensions, could dampen housing demand and weaken market confidence.
Sectors highly dependent on exports, particularly manufacturing and natural resources, could be hard hit, and disproportionately affect certain communities. However, if a severe downturn prompts the Bank of Canada to implement deeper interest rate cuts, it could stimulate housing demand by making borrowing more affordable. The interplay between these forces—economic risk versus monetary stimulus—will be a key factor to watch in 2025.
Toronto condo market faces near-term pressure
The condo market in Toronto could experience some near-term price softness due to a surge in new completions last year and waning investor demand.
Lower interest rates may eventually provide support, but the influx of units could temporarily weigh on prices, particularly in highly saturated areas. This trend may create headwinds for condo values before broader market conditions stabilize.
Mortgage renewal payment shock to remain a challenge
Many homeowners will continue to face significant financial strain when renewing their mortgages even as interest rates decline.
The earlier spike in borrowing costs means that many borrowers who secured ultra-low rates in 2020-2021 will see substantial payment increases at renewal. While lower interest rates in 2025 will provide some relief, they won’t be enough to fully offset the higher financing costs many will encounter.
This could force some owners to sell, adding to inventory and tempering price growth. However, Canada’s stringent mortgage stress test rules should help prevent a surge in distressed sales, keeping market imbalances generally in check.
Robert Hogue is an Assistant Chief Economist at RBC responsible for providing analysis and forecasts on the Canadian housing market and provincial economies. He joined RBC in 2008.
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