If 2025 is beginning to feel like a large and daunting question mark, you're not alone. From geopolitical conflict to economic uncertainty, there's plenty to keep a fretful eye on, especially as it relates to Canada's housing markets and real estate industry.

In hopes of quelling (at least some of) this uncertainty, we're addressing some of the most pressing questions related to real estate right now by looking at what we do know to better understand how things might go as 2025 unfolds.


1. What will Trump’s presidency mean for Canadian housing?

Let's get this out of the way, because US President Donald Trump is probably the largest question mark hanging over the year. He's the caveat to every market forecast released by the country's biggest banks, think tanks, and real estate associations in the last month, and he's wildly unpredictable.

That being said, though this term has already seen a plethora of bold executive orders, Trump is notorious for not following through on promises. Just this week, the 25% tariff he wanted to impose on Canadian imports by February 1 was put off for 30 days after the Feds agreed to expand an existing $1.3-billion border protection plan.

Here's what we do know: if tariffs are ever implemented, they could hit our housing market hard. The BoC may further cut rates as the US likely maintains or raises theirs, leading to a weakening of the Loonie, struggling Canadian business would translate to more conservative home sales, and counter-tariffs could drive up the cost of building materials. And broadly, Trump's erratic behaviour raises economic risk, and environments of high economic risk never bode well for real estate.

2. What's in store for interest rates?

Interest rates have been at the forefront of the Canadian real estate news cycle for some time now. We talk about them when they're going up, when they're going down, and even when they're not going anywhere. But after months of frequent and substantial cuts that brought the key interest rate down from 5% to 3% as of January 29, easing inflation and reawakening real estate markets across the country, we began 2025 in murkier territory.

BoC Governor Tiff Macklem stated in the December 23 summary of deliberations that rate cuts would be more "gradual" in 2025, with the reasoning being that the economy needs time to respond to the aggressive string of cuts we saw over 2024. But views are mixed on what this would actually look like. Scotiabank sees the rate sitting at 3% until the end of 2026, BMO says it could hit 2.5% by mid 2025, and RBC predicts the rate will fall to 2% by mid year.

Caveat Alert: though we seem to be out of the weeds on the tariff front (at least for the next 30 days), the BoC may be forced to stimulate the economy by more drastically cutting rates if the wind blows the wrong way and tariffs come into effect.

3. Will home prices rise?

The short answer is yes, prices are widely expected to increase over the course of 2025 as lower interest rates and mortgage reforms encourage homebuyers to jump off the sidelines. But price growth will vary in intensity depending on the market. One outlook from Royal LePage predicts that Quebec City will lead in year-over-year price increases with a growth rate of 11%, followed by Edmonton and Regina at 9%, Toronto by 5%, and Vancouver, Calgary, Ottawa, Halifax, and Winnipeg at 4%.

Price growth will also vary depending on product type, with single-family homes expected to lead the charge and condo apartments expected to see less-marked growth or even price decreases in some markets, like the GTA's.

At the same time, along with other larger forces, including immigration, trade uncertainty, and global conflict, the potential change in Canadian leadership could impact prices in unforeseen ways.

4. Will condo markets see a resurgence before 2026?

If you've been keeping tabs on Canadian real estate, you know that Canada's largest condo markets are in the gutter. In the GTA, over 2,800 condo units were cancelled in 2024, supply was sitting at around 40,000 units (as of the fall), and average prices slid by over $23k year over year in Q3 2024. In Vancouver, we saw similar trends, with presale transactions falling around 30% below the long-term average.

In short, no, it's not likely that we will see the return of healthy condo markets before 2026, or anytime soon for that matter. Demand for condos has fallen this year thanks to higher interest rates deterring investors (the largest buyer segment for condos), over-saturation from a recent wave of completions that originated during the COVID-19 presale condo bubble, and a lack of more desirable, family-sized units.

While lower interest rates and mortgage reforms that favour first-time homebuyers may spur a slight increase in sales this year, record low demand has led experts in the GTA — and the GVA as well — to forecast that condo construction is headed off a 'cliff.'

5. Will purpose-built rental continue to gain popularity?

Over the course of 2024, there was shift in focus from the embattled condo market to purpose-built rental. The pivot was the result of increased demand due to an influx of immigrants (a demographic that typically rents for 5 to 10 years before buying), a decrease in homeownership attainability, and the fact that governments at all levels have stepped in with measures to incentivize rental development.

Despite potential offsetting factors, such as recent immigration reductions and rent declines, it seems likely that purpose-built rentals will continue to flood municipal building application databases for the foreseeable future. This is because they continue to be seen as attractive long-term investments.

The increased emphasis on purpose-built rental comes after a multi-decade lag in rental supply, and they're now seen as more financially viable than condos with their stable returns and thanks to government-backed incentives like the removal of GST on rental projects. In addition, the segment is expected to have sustained demand from immigration, as, barring a Baby Boom 2.0, immigration will continue to be how Canada fuels economic growth and supplements its aging population.

6. Will rents continue to decline?

On the topic of rentals, national average rent began declining for the first time since 2021 in October and, as of December, average rent fell to $2,109, representing a year-over-year decline of 3.2% and a 17-month low. Rent growth slowed most dramatically in Toronto and Vancouver, while Montreal and Calgary's rate of decline remained above the national average. Meanwhile, outliers like Ottawa and Edmonton still saw year-over-year rent growth. As well, the national vacancy rate hit 3.6% in Q4 2024, the highest it's been since 2020.

Given the fact that rental supply is expected to continue coming online in large numbers through 2025, immigration is on the decline, and lower interest rates will aid in the transition of more renters into homeownership, the consensus is that rents will continue to decline over the course of the year. TD Bank, for one, is forecasting purpose-built rent growth will slow to a range of 3-4% by the end of 2025.

7. Will housing starts improve?

It has been widely accepted that Canada is unlikely to meet the housing target set by the Canadian Mortgage and Housing Corporation (CMHC) of 3.5 million housing units by 2030 — a target that some have argued should actually be closer to 5 million. In Ontario alone, at least 100,000 new homes per year are needed to achieve the province's target, but its Fall Economic Statement revealed that Ontario will far short between 2024 and 2027. Looking at projections, housing starts actually fall in each of those years.

On a national level, despite monthly housing starts slightly fluctuating throughout the year, CMHC has repeatedly highlighted that numbers were coming in far below what's required to restore affordability. And over the entirety of 2024, housing starts lagged in Canada's six largest cities, where more housing is needed most.

With the 'cost to build' crisis continuing to loom over developers' heads, new home sales plummeting, and investor sentiment down, we are unlikely to see a reversal of this trend within the next 12 months. In their 2025 Housing Market Outlook, released Wednesday, CMHC predicted housing starts will "slow down" while remaining above the 10-year average, citing the lack of condominium apartments being built.

With that said, CMHC sees progress varying by region, with places like Ontario and BC, where investors drive demand, seeing a notable decrease, and Alberta experiencing minimal impacts as more Albertan buyers are actual residents as opposed to investors.

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