The Canadian housing market is poised for stability in 2025 as declining interest rates and new lending rules bring buyers back to the market, according to Royal LePage’s Market Survey Forecast. The company predicts the average price of a home in Canada will rise by 6 per cent year-over-year to $856,692 in the fourth quarter of 2025, falling in line with long-term trends.
Single-family detached homes are expected to see a 7 per cent price increase, reaching a median value of $900,833, while condo prices are forecasted to grow by 3.5 per cent, reaching $605,993. “The backlog of willing and able buyers continues to grow, and upcoming changes to mortgage lending rules will further enhance Canadians’ borrowing power,” says Phil Soper, president and CEO of Royal LePage.
The Bank of Canada’s recent monetary policy shift, from “inflation fighter” to “economy booster” has been a key driver of this optimism, Soper points out. “We saw a marked increase in market activity at the start of the fourth quarter, following the Bank of Canada’s 50-basis-point rate cut,” he notes, adding that buyers, for the most part, believe home prices have bottomed out.
Regional price trends will reflect strong demand
The forecast predicts price growth across all major Canadian markets, with Quebec City leading the way at an expected 11 per cent increase in the price. Edmonton and Regina follow with projected gains of 9 per cent each. Meanwhile, Greater Montreal is expected to see a 6 per cent increase, outpacing the Greater Toronto Area’s moderate 5 per cent gain and Metro Vancouver’s 4 per cent increase.
“Over the past several months, supply has been building in the Toronto and Vancouver real estate markets as sellers responded to early interest rate cuts by listing their homes. However, with home prices in these cities remaining high, many sidelined buyers continued to wait for more favourable borrowing conditions,” Soper explains.
“Flat property prices also reduced the urgency often driven by fears of ‘missing out,’ creating a temporary stalemate where inventory lingered, and buyers hesitated to act. By mid-fall, this dynamic began to shift as buyers re-engaged with the market.”
Expanded lending rules should help first-time buyers
New mortgage rules set to take effect Dec. 15, 2024, aim to provide greater access to housing for first-time buyers and those purchasing new construction homes. These changes include eligibility for 30-year amortizations on insured mortgages and an increase in the mortgage insurance cap from $1-million to $1.5-million.
“First-time buyers will be the primary beneficiaries of these initiatives, as their ability to borrow more for less with a smaller down payment will help bring them closer to their first home purchase,” said Soper. “We believe the return of buyers to the market will encourage builders and trigger a wave of new supply, which is very much needed.”
Policy and economic factors
There is the potential for disruptions from political changes both domestically and in the U.S. New housing policies following a federal election in Canada, along with the trade agenda of the incoming Trump administration in the U.S., could have ripple effects on Canada’s housing market, Soper flags.
Outlook for 2025
The strongest quarterly gains are forecast for the first quarter of 2025, driven by an early spring market. National home prices are projected to increase 2 per cent from Q4 2024 to Q1 2025, followed by more moderate gains of 1.5 per cent in the second and third quarters, and 1 per cent in the final quarter of the year.
Soper anticipates 2025 will bring a level of normalcy, “After several years of unusual volatility in the real estate market, key indicators point to a return to stability in 2025.”
Read Royal LePage’s full report, including regional highlights.
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