The Canadian housing market is finishing up 2024 with unexpected momentum. A significant increase in home sales growth during the fourth quarter has shifted expectations, indicating a more positive outlook for 2025, according to the latest report from TD Economist Rishi Sondhi.
A Q4 surge
TD Economics estimates that Canadian home sales have increased by approximately 12 per cent quarter-over-quarter in Q4 of 2024, with the strongest gains coming from British Columbia and Ontario—“a major change relative to our September projection,” Sondhi writes. “Given the upgrade to the starting point, we now see sales reaching (and surpassing) their pre-pandemic level in 2024Q4.” TD Economics initially projected this would happen in the first quarter of 2025.
What’s driving growth?
Several factors are contributing to the Q4 breakout:
- Falling borrowing costs: Easing interest rates are boosting buyer activity.
- Economic growth: Sustained economic expansion provides a favorable backdrop for housing demand.
- Mortgage rule changes: New regulations implemented in December are expected to drive both demand and prices.
Regional trends
While nationwide trends suggest a “sunnier” outlook, regional variations are shaping the forecast:
British Columbia and Ontario
These provinces are expected to lead in sales growth in 2025, fueled by pent-up demand. However, affordability challenges in both regions may moderate price increases. In Ontario, for example, the Toronto area’s condo market is facing oversupply issues, likely resulting in continued price declines next year. Nevertheless, Sondhi notes, “This condo market weakness should make it easier for more expensive types of housing, like detached units, to outperform, providing some offsetting upside for average prices.”
The Prairies
Alberta and its Prairie neighbors are anticipated to remain relatively stable due to their better affordability and slower population growth deceleration compared to other regions. “Our forecast for Alberta’s home price growth suggests that by the end of 2026, average home prices will have increased for 7 consecutive years in the province.”
Quebec
Quebec’s housing market is projected to experience solid price gains in 2025, supported by tight market conditions and federal policies.
Atlantic Canada
While prices in the Atlantic provinces are expected to rise in the short term, a noticeable slowdown in interprovincial migration is reducing ownership demand. Consequently, the region may experience significantly slower price growth in 2026.
Risks to the Outlook
Despite the positive trajectory, Sondhi acknowledges that risks persist. Tariff threats present a significant challenge. “Full or partial implementation will harm the economy and, therefore, housing more than we have factored into our baseline. On the upside, falling borrowing costs could exert upward pressure on sales and prices more than we anticipate.”
Read the full report from TD Economics.
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