Some Canadian real estate observers expect borrowing costs to bottom out just as sellers flood the spring market with listings, triggering a flood of activity in many countries. housing markets across Canada in early 2025.
This could send house prices higher in many cities – but not all markets will feel the expected housing rebound equally, experts warn.
The Canadian Real Estate Association released its 2025 housing outlook Wednesday, the same day it announced its report. house sales activities for December.
CREA said that although December sales fell flat with a monthly decline of 5.8 percent, higher activity in November and October helped propel the final quarter of 2024 to a stronger result.
December’s sales figures were 13 percent higher than May’s, a month before the Bank of Canada began lowering its benchmark interest rate.
This round of easing has since seen the central bank cut its policy rate by 1.75 percentage points, including two consecutive half-point cuts in October and December. Most economists expect a few more interest rate cuts from the central bank this year.
Shaun Cathcart, CREA’s senior economist, told reporters at a news conference Wednesday that if the Bank of Canada makes a few more cuts in the coming months and signals that the policy rate may have found its stabilization point, this could trigger a wave of activity in the already traditionally busy spring market.
Canada has experienced record population growth in recent years, but this demand has not manifested itself in property markets due to ongoing affordability issues related to both lack of supply and housing rates. “Higher interest rates from the Bank of Canada,” Cathcart explained.
With rates expected to bottom out as sellers add listings and new completions come online, CREA expects the rapidly growing cohort of buying-age adults to a house begins to make its presence felt in spring.
“It hasn’t shown up in our data…but we think it’s ready,” Cathcart said.
He tempered that call by emphasizing that the Bank of Canada’s key rate is unlikely to return to the lows seen before or during the COVID-19 pandemic, when cheap borrowing costs caused many Canadians to flock to the real estate market.
“Accessibility has improved from last year, but it remains more difficult than it has been in 20 years,” Cathcart said. “So it will bring some buyers back, but we won’t go back to COVID activity levels.”
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Royal LePage CEO Phil Soper told Global News on Wednesday that he also sees the turmoil in the fourth quarter of 2024 as a precursor for the year ahead in Canada’s housing sector.
“Sales have been significantly restricted since this pandemic boom. It’s been two and a half years,” Soper said. “But we saw things change noticeably in the fourth quarter of 2024, and this increase in activity levels should lead to price appreciation through 2025.”
Where do prices go from here?
On an unadjusted basis, the national average home price in December was $676,640, up 2.5 percent from last year.
The CREA National Home Price Index, a more comparable comparison of housing prices, increased 0.3 percent year over year, a second consecutive monthly increase.
Royal LePage broke down those prices by property type in its fourth-quarter sales report released Tuesday. The brokerage said the national median price for a detached single-family property was $855,900 in the final quarter of 2024, while condos sold for $592,700.
In its 2025 outlook released last month, Royal LePage said it expected the overall price of a home to increase 6.0 per cent in the fourth quarter of the year, compared to the same period in 2024.
The CREA projects that the average home value will climb 4.7 percent on an annual basis in 2025, leaving the typical sales price at $722,221 by the end of the year.
But Cathcart said CREA predicts a “vast” difference in activity and price growth across markets this year.
British Columbia and Ontario, the two most expensive Canadian provinces to buy a home, are expected to see a pick-up in activity, in part because they have slowed significantly recently and have more room to recover.
But that could come with limited price increases, Cathcart noted, as these already unaffordable markets are overflowing with inventory, especially in Toronto’s bloated condo market.
“They have a lot of opportunity for buyers to come back into this market and start absorbing inventory before buyers start meeting and driving up prices,” he said.
The recovery is already well underway in the Prairies and some East Coast markets, Cathcart added.
Relatively affordable projects in Alberta and Saskatchewan are expected to be in high demand this year, according to ACI projects. Inventory levels there are already near 20-year lows, meaning prices could rise.
“For every 10 buyers, there are maybe only five houses,” Cathcart said of Prairies.
ACI projects where markets like Quebec, Manitoba and some Atlantic provinces will fall somewhere between these extremes in terms of price and sales appreciation.
In total, CREA expects some 532,704 properties to change hands in Canada this year, representing an annual increase of 8.6 per cent.
Trump Tariffs Threaten Economic Outlook
TD Bank economist Rishi Sondhi echoed predictions of rising home prices and sales in 2025 in a note to clients Wednesday.
While these are TD’s “baseline” forecasts, he cautioned that “the macroeconomic backdrop remains highly uncertain due to tariff threats” from US President-elect Donald Trump.
Cathcart also noted that ACI’s forecast could fluctuate depending on whether economic impacts materialize after Trump’s second term begins on January 20.
“These figures could be very different in a short time,” he warned.
Cathcart added that, with no clarity yet on how trade disputes might be resolved, the ACI’s current forecasts are intentionally “conservative.”
Soper acknowledged that it’s possible that Trump’s damaging tariffs could cause a shock to the Canadian economy that ultimately raises the unemployment rate and hurts home buying prospects for many. households.
But he added that such a rise in the unemployment rate would occur over time and therefore reveal its impact on the Canadian economy in the longer term – potentially ignoring the spring housing market.
“It would take an overall deterioration in the economy that would impact people’s ability to get a mortgage, for example, to have an impact on the housing market,” Soper said. “And while that could happen, it’s unlikely to happen in time to impact the current trajectory of real estate markets.”
– with files from Kyle Benning of Global News