According to BMO Senior Economist, Robert Kavcic, the Canadian housing market is expected to experience modest sales and price gains in 2025, but it will still take time to reach the highs of 2022.
In BMO’s housing outlook for 2025, Kavcic predicts that national home prices will not surpass 2022 levels until 2029 under the bank’s base-case scenario.
Modest growth in sales and prices
The report forecasts a 12% increase in sales volumes this year, driven by a rebound from the previous year’s low levels, with the benchmark home price expected to rise by 4% due to affordability challenges and investment considerations.
Regionally, Southern Ontario and British Columbia are expected to recover, while Alberta and Atlantic Canada may see more subdued growth compared to their performance during the pandemic.
BMO points out a significant disparity in performance within major cities like Toronto, where single-detached homes are in demand, but the condo market is facing pressure from an influx of new units, leading to struggles in condo prices.
Mortgage rates near cycle lows
Mortgage rates play a crucial role in shaping the housing market in 2025. BMO notes that most of the Bank of Canada’s rate cuts have already been factored into fixed mortgage rates, which now range from low to mid 4%. There is potential for variable rates to test the 4% level, but the Bank will need to continue easing.
New mortgage rules introduced in December are expected to improve conditions in the spring season by increasing the price cap for insured mortgages and extending 30-year amortizations to first-time buyers and new home purchasers.
Challenges in affordability and investment
Affordability remains a significant challenge despite positive trends. Kavcic suggests that borrowing costs below 4% could allow for modest price increases without affordability constraints.
A cooling rental market
The rental sector is experiencing shifts with reduced immigration targets and an increase in rental supply leading to lower rents in major markets. This trend is expected to continue in 2025, providing relief to renters.
Long-term outlook
BMO emphasizes that the Canadian housing market is undergoing a prolonged period of consolidation. Kavcic compares the current situation to past corrections, highlighting demographic and financial pressures on the market.
With the factors that drove the 2022 highs dissipating, the road ahead points towards gradual recovery rather than rapid growth.
Source link
This article was complied by AI and NOT reviewed by human. More information can be found in our Terms and Conditions.
