Canada’s Housing Market Was Poised for a Comeback. Then Trade War Jitters Set In.
With consumer confidence at its lowest level on record and the trade war threatening to increase inflation and tip Canada into recession, experts expect that housing will create significant drag on the economy. The risk Canada faces now is stagflation, with both elevated inflation and weak economic growth, which central banks are not well equipped to fight.
The debate should be over how significant a headwind the housing market will be. The next government will inherit a real estate sector in dire straits. Home sales slumped 9.3% to the lowest level since February 2009, and prices also slid for the third straight month, with the Canadian Real Estate Association’s broad-based MLS Home Price Index down 8.5% on an annualized basis so far this year. Many Canadians who were actively house-hunting in January have since fled the market, with uncertainty about tariffs more than the tariffs themselves impacting people.
The housing market is also fracturing in other ways, as builders themselves are putting down their tools. Homebuilding activity is extremely slow right now, with a depressed market for almost two years. In addition to the uncertainty around trade and the economy, there are lingering forces that have buffeted the sector, including slow municipal approvals, rising development charges, and higher costs for building materials and labor.
Across Ontario, new housing starts fell to 39,000 on an annualized basis in March, a level not seen since the depths of the Great Recession in 2009. This slowdown in new home construction is expected to compound Canada’s affordability crisis, as a shortage of new supply could help keep house prices higher for longer.
Canada’s growth outlook is uncertain due to Ottawa restricting temporary immigration and slowing down the rental market, while a trade war-induced recession in Canada will lead to around 200,000 job losses by early 2026, according to a new report from Tony Stillo, director of economics for Canada at Oxford Economics.
Canadian policymakers have relied on the real estate sector to revive growth during times of crisis, with falling interest rates spurring home construction, juicing prices, and enabling homeowners to borrow against their home equity to splurge on goods and services. The Bank of Canada has put its campaign of monetary easing on hold this month and left the benchmark policy rate unchanged at 2.75%, citing concerns about rising prices. Fears of inflation and uncertainty brought on by Trump’s efforts to tear up the global trading system have been putting upward pressure on bond yields, which underpin fixed-rate mortgages.
Source: Globe and Mail
Tariff Uncertainty Foils ‘Slam Dunk Rebound Year’ for National Home Sales
The Canadian Real Estate Association (CREA) has downgraded its forecast for home sales in 2025 due to concerns about tariffs and interest rates. The new forecast, which updates a prior forecast released on January 15, is CREA’s largest revision between quarters since the 2008-2009 financial crisis. The CREA now expects 482,673 residential properties to trade hands in 2025, which would be virtually unchanged from 2024 levels. This is a large downward revision from the 8.6% sales increase predicted in January.
National home sales in March fell 9.3% below the same month last year, reaching their lowest level for March since 2009. Sales were down 4.8% from February on a seasonally adjusted basis. This comes after three previous months of declines, with sales falling 20% since their high last November. Mortgage professional Katy Mackenzie, mortgage professional at The Mortgage Group in Vancouver, said that the key trend word right now is uncertainty, and some people are very uncertain, and they are pausing their home search.
The national average sale price rose 0.3% in March, an increase over February but a fall of 3.7% from a year ago. CREA forecast a 0.3% decrease in the national average home price this year to $687,898, about $30,000 lower than it forecast in January. British Columbia and Ontario are expected to see small declines in average home prices, while other provinces are expected to see gains of between 3% and 5%.
This may be good news for first-time homebuyers, but not so much for those looking to sell or downsize. The supply of homes for sale increased by 3% from February to March, but combined with lower sales, the sales-to-new listing ratio fell from 49.7% to 45.9% in the same period.
Investors are hunting for properties with lower values and lower sales due to uncertainty, giving them more negotiation power. Despite the uncertainty and volatility in the market, Mackenzie emphasizes having a long-term plan to help weather short-term economic turbulence.
Source: Globe and Mail
Source: The Star
Source: CREA
Annual Pace of Housing Starts in Canada Slowed in March
Canada Mortgage and Housing Corp. reported a slowed annual pace of housing starts in March, with 214,155 units, down from 221,405 in February. This was due to a 2.8% decrease in starts in centers with a population of 10,000 or more, dropping from 209,093 in February to 203,285 in March.
Single-detached home starts rose by 1% to 43,012 in March, while all other home starts fell by 4% to 160,273. Rural starts were estimated at 10,870 in March. The six-month moving average of the seasonally adjusted annual rate fell 0.7% to 235,316.
Source: Globe and Mail
Source: The Star
Source: CMHC
Building Permits, February 2025
In February, the total value of building permits issued in Canada increased by 3.2% to $13.1 billion, with gains in construction intentions being led by British Columbia’s non-residential sector. The national value of non-residential building permits increased by +15.3% to $4.7 billion, rebounding after four consecutive months of declines. The growth in Canada’s non-residential sector was spread across its three components, with gains in the commercial, industrial, and institutional sub-sectors.
British Columbia’s multi-family component led the decline in residential construction intentions, with decreases concentrated in the Vancouver census metropolitan area (CMA). Quebec and New Brunswick also contributed to the residential sector decrease, while Ontario helped offset losses in the national residential sector the previous month. Quebec’s residential sector decline was driven by the multi-family component and supported by the single-family component, while New Brunswick’s decrease was led by the multi-family component.
Across Canada, 21,000 multi-family dwellings and 4,800 single-family dwellings were authorized in February, down 7.1% from the previous month. The industrial component ticked up in February 2025, after trending downward since September 2024.
Source: Statistis Canada
