Economic Threats from the U.S. Sap Canadian Housing Market: Toronto Sales Drop 28.5% in February
The Canadian housing market is facing economic threats from the United States, prompting some prospective homebuyers to delay purchases. Home sales in the Toronto region fell 28.5% from January to February, the steepest decline since the first month of the pandemic when sales fell 63.7%. Uncertainty about the US trade relationship with the US has likely prompted some households to take a wait-and-see attitude toward buying a home.
The real estate industry had predicted a rebound in the housing market after over two years of low sales, with pent-up buyer demand and the Bank of Canada’s recent interest rate cuts expected to fuel activity this year. However, buyer confidence started to wane with the threat of tariffs, which was slapped by President Donald Trump. Canada’s first round of retaliatory tariffs targets $30 billion worth of U.S. goods.
Real estate agents and mortgage brokers reported that some clients had put their purchase plans on pause due to the risk of a U.S. trade war. Some clients wanted a safety net and wanted to keep their funds because they don’t know how the trade war will affect the economy. Victor Tran, a mortgage broker in the Toronto region, said there are many prospective homebuyers who are now super cautious, with no urgency to purchase anything right now.
Mortgage brokers and lenders are experiencing slow growth in the mortgage market due to uncertainty surrounding tariffs. Calgary-based True North Mortgage reports that about half of purchasers are holding off due to this uncertainty. Real estate brokerage HouseSigma Inc. also reports that homebuyers are becoming increasingly cautious due to tariffs.
The Canadian Real Estate Association predicted a significant increase in sales in early January, but its senior economist Shaun Cathcart suggests the association may have to downgrade its forecast due to the trade war as a significant downside risk.
February sales were higher than January in some regions, but uncertainty persists in Guelph, Ontario. New listings in Toronto fell 24% from January to February, while Vancouver saw home sales rise 17.7% and new listings decrease 9%. The Fraser Valley saw sales rise 12.5%, new listings fall 9%, and the Home Price Index remains flat at $962,500. As a result, people are ready to take action.
Source: Globe and Mail
Source: The Star
Trade War Will Raise the Price of New Homes on Both Sides of the Border, Say Canada and U.S. Homebuilders
The 25% tariffs on imports from Canada and Mexico by US President Donald Trump have caused a stock market dip and widespread condemnation from Canadian leaders. Industry voices warn that these tariffs will make new homes more expensive and delay construction, just as they are needed more than ever. Richard Lyall, president of the Residential Construction Council of Ontario (RESCON), said the tariffs will “drive up the cost” of materials and equipment for building housing. The American National Association of Home Builders is also concerned, as it will “harm housing affordability.”
The massive trade back and forth between the two economies will create chaos and uncertainty, stalling projects and undermining consumer and builder confidence. The tariffs represent a clear break in US policy, which has encouraged free trade between the two countries for decades.
Canada exported 6.56 million tons of steel to the U.S. last year and accounted for 56% of aluminium imports in 2023. Canadian Prime Minister Justin Trudeau called the tariffs “a very dumb thing to do” and is imposing a 25% tariff on $30 billion of U.S. products. Kevin Lee, CEO of the Canadian Home Builders’ Association, is particularly concerned about the impact of reciprocal tariffs on construction costs.
The trade war will have a huge impact on the Canadian economy in general, with Ontario Premier Doug Ford warning that the tariffs will have a devastating impact. He said the tariffs will lead to people spending less, job losses, and less of a market for new homes, resulting in fewer housing starts. The home-building industry was already facing challenges such as higher interest rates and development taxes, making goals like Ontario’s ambitious target of 1.5 million homes by the end of 2031 even more out of reach.
Source: The Star
Tariffs Set to Slow Pace of Homebuilding in Canada
Canada’s building industry is predicting that a trade war with the US will slow down home construction, according to Canadian Home Builders’ Association chief executive Kevin Lee. While the US tariffs on Canada will have a “muted” impact on the industry, the expected slowdown in the economy due to tariff impacts could hold the national housing market back, dragging down housing starts. Lee said that consumer confidence is already taking a hit due to fears about job insecurity tied to tariffs.
The Canadian Home Builders’ Association (CHBA) has asked the federal government to limit the scope of counter-tariffs to either skirt construction materials entirely or focus on products that builders can more easily source outside the US. Trump’s tariffs arrived the same morning the CHBA released its third annual Municipal Benchmarking Study, which tracks efforts to reduce homebuilding barriers across Canada.
AcceCities in Ontario and British Columbia were tagged as the worst offenders for delaying new home construction approvals and failing to reduce costly development charges. Lee said that while reducing these barriers is key to addressing Canada’s housing shortage in the long run, municipalities could also “more than offset” higher construction costs tied to tariffs by cutting development charges and speeding up approvals.
Source: Financial Post
Home Sales Dented by Tariff Worries in January as Listings Surge
Tariff uncertainty has put downward pressure on home resales in January, while total listings saw one of the biggest spikes in decades, according to the Canadian Real Estate Association. Sales were down 3.3% from December when seasonally adjusted, but January sales were still up 2.9% compared to a year earlier. New listings were up 11% from December, the largest seasonally adjusted monthly increase on record since the 1980s. January new residential listings were up 23%, including an almost 50% jump in Greater Toronto.
The timing of this change in demand leaves little doubt as to the cause, uncertainty around tariffs. The inauguration of US President Donald Trump on Jan. 20 has ushered in threats and worries about Canada’s most important trading relationship, leading to wider concerns about potential economic impacts. There is also an election in Ontario and one pending federally to add to the unease.
The increase in listings has so far not led to much price change, with the average price being up 1.1% from a year earlier at $670,064 and down 2.2% seasonally adjusted from December. The aggregate benchmark price of $720,500 was up 0.2% from a year earlier and down 0.1% from the previous month. The lack of much price change is happening as there are relatively few forced sales, as indicated by a mortgage delinquency rate that remains below pre-pandemic levels.
The rise in listings is happening as rental rates pull back, hitting an 18-month low in January after a 4.4% decline on an annual basis. A wave of condo completions is also expected this year. The total of nearly 136,000 active listings across Canada at the end of January was up almost 13% from a year earlier, but still below the long-term average for the season of around 160,000.
Housing Starts up 3% in January, but Trade Risks Add ‘Significant Uncertainty
Canada Mortgage and Housing Corp. reported a 3% increase in the annual pace of housing starts in January compared to December, driven by strength in multi-unit starts in Quebec and British Columbia. The seasonally adjusted annual rate of housing starts was 239,739 units, up from 232,492 units in December. Urban starts also rose by 3% to 220,643 units in January, while multi-unit urban starts rose by 8% due to more purpose-built rentals in Quebec and British Columbia.
Actual housing starts were up 7% year-over-year in cities with a population of at least 10,000, with 15,930 units started in January 2025. Montreal saw a 12% year-over-year increase in actual housing starts, while Vancouver recorded a 37% increase. Toronto saw a 41% drop in starts from January 2024 due to decreases in multi-unit starts.
The six-month moving average of the seasonally adjusted annual rate of housing starts was down 2.5% at 236,892 units in January. The agency’s recent housing market outlook report projected a rebound in home sales and prices this year as homebuyers take advantage of improved borrowing conditions. However, it forecasted starts to slow down from 2025 to 2027 due to fewer condominiums being built and fewer demand from young families.
While housing starts have seen a strong start to the year, lower immigration levels and evolving U.S. trade policies are affecting the country’s economic outlook. The CMHC has identified three scenarios for housing growth, based on economic uncertainty caused by reduced immigration targets and potential U.S. tariffs. In a worst-case scenario, a 25% tariff on Canadian imports could impact the economy as early as 2025. However, the CMHC expects housing market activity to improve into 2026-’27 due to lower mortgage rates, changes to mortgage rules, and first-time home buying millennials driving demand in urban areas.
Source: The Star
Source: CMHC
Source: Financial Post
Building permits, December 2024
In December, the total value of building permits in Canada rose 11.0% to $13.1 billion, with a 21.2% increase in the residential sector, largely due to gains in Ontario and British Columbia. The total value of residential permits increased by $1.6 billion to $9.0 billion, with multi-unit construction intentions contributing the most to the gain, posting a 33.3% increase from the previous month.
Construction intentions for single-family homes were up 1.8% to $2.9 billion in December, recording gains across six provinces and two territories. The total value of non-residential permits fell 5.9% (-$262.2 million) to $4.2 billion in December, marking the third monthly decrease in a row. Declines in the commercial (-$221.1 million) and institutional (-$167.6 million) components more than offset a gain in the industrial component (+$126.5 million).
Monthly declines in non-residential construction intentions were recorded in seven provinces and one territory in December. Ontario’s non-residential sector posted a $98.4 million gain in December, driven by its industrial component (+$315.8 million). Meanwhile, both Ontario’s institutional (-$181.9 million) and commercial (-$35.5 million) components decreased.
The total value of building permits in the fourth quarter edged up $430.8 million (+1.2%) to $37.5 billion, marking the fourth consecutive, albeit slowest, quarterly increase in 2024. In the fourth quarter, the residential sector led the growth, while the non-residential sector retreated after reaching a record high level in the third quarter.
Year over year, the total value of building permits issued in Canada increased by $10.5 billion (+7.8%) to $145.3 billion in 2024, reaching its highest level since the start of the series in 2017. The constant dollar growth reflects a declining trend in the real value of single-family building permits, which tempered the upward trend in the real value of multi-family and non-residential permits.
In 2024, the residential sector increased by $3.1 billion (+6.3%) to $52.5 billion, marking the second-lowest level in the series, following the record low of $49.3 billion in 2023. The multi-family component increased by $3.7 billion (12.2%) to $34.1 billion, the second-highest level in the series. The total value of non-residential building permits issued experienced a fourth consecutive annual increase, rising by $59.5 million (+0.2%) to $36.6 billion in 2024, with Ontario (+$1.6 billion) leading the growth.
Source: Statistics Canada
New Home Buyers Are Nowhere to Be Found
New home sales in the Greater Toronto Area (GTA) reached a near-record low in January, with 347 sales down 40% YoY and 77% below the 10-year average. Despite a Bank of Canada cut, excessive inventory, and falling prices, GTA new home buyers are still absent. Condos accounted for 101 units sold in January, down 58% from January 2023 and 88% below the 10-year average. Single-family sales in the GTA were 246, down 27% from January 2023 and 63% below the 10-year average.
Total new home remaining inventory remained flat in January compared to the previous month, with a healthy market level of nine to 12 months. Justin Sherwood, BILD’s senior vice president of communications, research, and stakeholder relations, believes that with the spring market on the horizon, it’s “prime time” for buyers to enter the market as prices have dropped around 20% since the 2022 peak. Prices decreased for new single-family homes by 1.2% YoY and condo prices by 3.5%. However, the cost to build a new home remains high due to labour and material costs.
Buyers remain on the sidelines due to significant inventory in the resale condo market, which impacts the new build market. The threat of tariff wars with the U.S. and the Bank of Canada’s further interest rate cuts have also caused potential buyers to wait and adjust to the economy.
Source: The Star
