The Canadian housing market finds itself at a critical juncture in 2025, as the threat of U.S. tariffs adds uncertainty to an already delicate economic environment.
According to RBC Economics, “the significant risk that tariffs pose to Canada’s economy casts a potentially dark shadow over the housing market.” With consumer confidence playing a pivotal role, potential economic turbulence could unsettle both buyers and sellers.
Robert Hogue, assistant chief economist at RBC, likened the housing outlook to “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.” While the U.S. administration paused the implementation of blanket tariffs earlier this month, Hogue suggests the introduction of targeted measures, such as a 25 per cent tariff on Canadian steel and aluminum imports means that trade tensions aren’t going away anytime soon.
Lower interest rates
Aside from looming economic risks, some bright spots are emerging for Canada’s housing market. RBC predicts a recovery in 2025, fueled largely by declining interest rates. Lower borrowing costs are expected to unlock pent-up demand and reduce ownership expenses, bringing much-needed momentum into the market.
Buyers will also benefit from an increasing inventory of homes for sale. “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,” Hogue notes. Mortgage insurance rule changes, introduced in December, are also expected to bring more first-time homebuyers to the market.
Affordability, immigration cuts and tariff risks
Perhaps unsurprisingly, affordability challenges remain a hurdle. While lower rates provide some relief, RBC warns that “strained affordability—despite easing somewhat—will continue to limit buyers’ capacity or willingness to bid up prices aggressively.”
Compounding uncertainty is a sharp slowdown in immigration, as the federal government scales back annual targets. Population growth, a key driver of housing demand, is projected to decline substantially, and will likely “temper upward price pressure.”
The potential for U.S. tariffs adds another layer of complexity. Sectors heavily reliant on exports, such as manufacturing and natural resources, could face significant job losses, disproportionately affecting specific regions. In such a scenario, market confidence could take a hit.
However, RBC suggests that “ 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.”
A return to normalcy for sales and prices
Barring a major economic shock, RBC forecasts a 12 per cent increase in national home resales in 2025, reaching 551,000 units—marking a return to “more normal levels of activity—about 7 per cent above the average during the five years preceding the pandemic.”
Property values, however, are expected to see minimal growth, with the average home price projected to rise 1.4 per cent this year. This modest price appreciation reflects a balanced market, with demand and supply largely offsetting each other.
RBC’s regional market outlook
British Columbia
Resales are expected to rebound 16.5 per cent, but affordability issues will limit price gains to 0.9 per cent.
Alberta
Strong momentum continues, with resales forecasted to rise 4.8 per cent and prices climbing 4.1 per cent.
Saskatchewan
Solid momentum persists, with resales projected to climb 6.7 per cent to 14,400 units, while prices are expected to rise 2.9 per cent to $370,200.
Manitoba
The market continues its recovery, with resales forecasted to grow 8.9 per cent to 17,200 units and prices appreciating 3.1 per cent.
Ontario
A bumpy recovery path is anticipated, with resales up 12.9 per cent, while prices are projected to increase by a muted 0.9 per cent.
Quebec
A strong rebound is underway, with resales forecasted to rise 17.3 per cent, following a 19.1 per cent surge in 2024. Prices are expected to increase 3.9 per cent, making Quebec one of the stronger performers among provincial markets.
Atlantic Canada
A broad-based rebound in activity is expected, with resales forecasted to grow 10.5 per cent in New Brunswick, 11.7 per cent in Nova Scotia, 5 per cent in Prince Edward Island, and 3.5 per cent in Newfoundland and Labrador. Price appreciation is projected to range from 1.5 per cent in PEI to 4.1 per cent in Newfoundland and Labrador.
Toronto’s embattled condo market
Toronto’s condo market, as we’ve heard, faces near-term challenges or “price softness,” as Hogue describes it. A surge in new completions, coupled with waning investor demand, could temporarily weigh on prices in highly saturated areas. Hogue predicts that “lower…
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