What to Expect from the Canadian Housing Market in 2025
With lower interest rates and new mortgage rules, 2025 is shaping up to be a stronger year for the Canadian housing market, economists suggest.
By Josh Sherman | 4 minute read
There’s general anticipation of more homes changing hands (and at higher prices) in Canada next year, but the forecast isn’t sunny from coast to coast.
The Canadian housing market’s year-end rally is only going to gain momentum in the New Year, according to predictions from market-watchers.
In November, national home sales increased 2.8% from the previous month, which left activity up 26% from the same time last year, according to the latest available data from the Canadian Real Estate Association.
The benchmark home price posted a 0.6% month-over-month gain as well — the largest one-month uptick since July 2023, notes BMO Senior Economist Robert Kavcic. While prices remained 1.2% lower than a year ago, that won’t remain the case for long, he suggests in a report: “We expect further increases in sales volumes and a moderate upward move in home prices nationally through 2025 as market conditions start to look and feel more ‘normal’—if there is such a thing in Canadian housing.”
(Even) Lower Rates Ahead?
The outlook for a busier next year for the real estate industry has a lot to do with lower interest rates. Since June, the Bank of Canada has cut its overnight rate five times. Over this period, the rate, which impacts mortgages and other consumer debt, has fallen from 5% to 3.25%. Economists are pencilling in more cuts for 2025, albeit at a less-aggressive pace. Market-watchers anticipate a cooler economy, with lower immigration and the threat of the U.S. imposing tariffs on Canadian exports.
New mortgage rules, which were announced on Sept. 16 and came into effect Dec. 15, should also support homebuying activity after the ball drops. All first-time homebuyers now have access to 30-year mortgages, an increase of five years. Spreading out the mortgage term over an additional five years shaves 8% off monthly payments for an average Canadian home, RBC estimates. As per the rule changes, the cap on insured mortgages has been raised to $1.5 million, up from the previous $1 million limit.
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Although these developments appear to support higher home sales and prices next year, the outlook varies by region and housing type, and in some cases quite considerably, economists note.
Condo Comeback Delayed
The embattled condo markets in the Greater Toronto Area and Greater Vancouver were major Canadian real estate stories of 2024. It looks like it’ll be pretty much the same old story in 2025. That is, if things play out the way CIBC Deputy Chief Economist Benjamin Tal and Katherine Judge, a senior economist with the bank, expect.
In a recent report, the CIBC economists suggest condos will continue to underperform the single-family segment through 2025. “The high-rise segment has been in recessionary territory for the past few quarters and is likely to remain under water for most of 2025, as record-high completions will continue to chase reduced investors’ appetite,” the report reads.
While condo construction has practically ground to a halt, contractors continue to complete buildings that were launched during the previous boom. Some of these units are appearing on the resale market as investors look to cut their losses, adding to a glut of supply and a market favouring buyers. “However, buyers’ market conditions will not last for long,” Tal and Judge caution.
Since new project launches have been scarce, when more investors and end-users do eventually return to the market, there won’t be enough supply to meet demand.
Eventually, a resulting lack of new supply should spark a turnaround in the Greater Toronto and Greater Vancouver markets, which currently favour buyers — but not until mid-2026, Tal and Katherine Judge suggest. By next year’s fourth quarter, the median price of a condo in Canada is forecast to climb a tepid 3.5%, but in the GTA a 1% decline is predicted, according to the Royal LePage Market Survey Forecast.
It’s All About the Single-Family Home
Unlike the condo market, the single-family home segment is poised for growth, real estate observers note. For one, the increased cap on insured mortgages opens the door for more homebuyers to purchase single-family homes without a 20% downpayment in Canada’s priciest markets.
By the end of 2025, Royal LePage’s market survey predicts the median price of a detached home is going to surpass $900,000, increasing 7% from this year and doubling the rate of price appreciation for condos.
“The tale of the Canadian housing market in 2025 is a tale of two markets,” state Tal and Judge of CIBC in recent commentary. “The low-rise segment will be the first to respond to lower mortgage rates, with still historically low inventories translating increased demand into higher home price inflation.”
Prairies Hot Streak to Continue
Next year will be another hot one for housing markets in the Prairies — and there’s no end in sight, TD Economist Rishi Sondhi suggests in a recently published Canadian Housing Outlook. “Our forecast for Alberta’s home price growth suggests that by the end of 2026, average home prices will have expanded for 7 straight years in the province,” he writes.
Major housing markets in the Prairies — and Calgary especially — weathered the storm of higher interest rates better than Canada’s other big cities. Population growth and the region’s relative affordability have supported demand, and Sondhi says these will remain tailwinds.
Josh Sherman
Wahi Writer
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