Some Canadian real estate watchers are expecting borrowing costs to hit their floor at the same time sellers flood the spring market with listings, unleashing a flood of activity in many housing markets across Canada in early 2025.
That could send home prices higher in many cities — but not all markets will feel the forecast housing rebound equally, experts warn.
The Canadian Real Estate Association released its 2025 housing outlook on Wednesday, the same day it reported home sales activities for December.
CREA said that while December sales fell flat with a 5.8 per cent monthly decline, higher activity in November and October helped to power the final quarter of 2024 to a stronger result.
December’s sales figures came in 13 per cent higher than activity in May, a month before the Bank of Canada started lowering its benchmark interest rate.
That easing cycle has since seen the central bank lower its policy rate by 1.75 percentage points, including a pair of back-to-back half-point cuts in October and December. Most economists expect a few more interest rate cuts from the central bank this year.
CREA senior economist Shaun Cathcart told reporters at a press conference Wednesday that, if the Bank of Canada delivers a couple more cuts in the months to come and signals the policy rate may have found its settling point, that could set up a wave of activity in the already traditionally busy spring market.
Canada has seen record population growth in the past few years, but that demand hasn’t shown up in ownership markets amid ongoing affordability challenges tied to both a lack of supply and higher interest rates from the Bank of Canada, Cathcart explained.
With rates expected to bottom out at the same time as sellers are adding listings and new completions are coming online, CREA expects that the rapidly growing cohort of homebuying-aged adults will start to make their presence felt in the spring.
“It hasn’t been manifesting itself in our data … but we think it’s ready to go,” Cathcart said.
He tempered that call by noting that the Bank of Canada’s policy rate is not expected to return to the lows seen before or during the COVID-19 pandemic, when cheap borrowing costs saw many Canadians flood into the housing market.
“Affordability has improved from last year, but affordability is still tougher than it has been for 20 years,” Cathcart said. “So it will bring some buyers back, but we’re not going back to COVID levels of activity.”
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Royal LePage CEO Phil Soper told Motorcycle accident toronto today on Wednesday that he also sees the stirring in the fourth quarter of 2024 as a precursor for the year to come in Canadian housing.
“Sales were restricted severely since that pandemic boom. It’s been two and a half years,” Soper said. “But we saw things change markedly in the fourth quarter of 2024, and that that bump in activity levels is expected to drive price appreciation through 2025.”
Where do prices go from here?
On a non-seasonally adjusted basis, the national average home price in December was $676,640, up 2.5 per cent from last year.
The CREA National Home Price Index, a more like-for-like comparison of dwelling prices, rose 0.3 per cent year-over-year, a second consecutive monthly increase.
Royal LePage broke those prices out by property type in its sales report on the fourth quarter of the year released on Tuesday. The brokerage said the national median price of a single-family detached 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 foresees the aggregate price of a home rising to 6.0 per cent in the fourth quarter of the year, compared with the same period in 2024.
CREA is calling for average home values to climb 4.7 per cent on a yearly basis in 2025, leaving the typical sale price at $722,221 by the end of the year.
But Cathcart said that CREA predicts a “vast” difference in activity and price growth from market to market this year.
British Columbia and Ontario, Canada’s two most expensive provinces to buy a home, are expected to see a rebound in activity, in part because they’ve slowed so much recently and have more room to recover
But that could come with limited price hikes, Cathcart noted, because these already unaffordable markets are swimming in inventory, particularly in Toronto’s bloated condo market.
“They’ve got a lot of runway for buyers to come back into that market and start to absorb inventory before buyers start running into each other and competing prices up,” he said.
The recovery is already well underway in the Prairies and some East Coast markets, Cathcart added.
Relatively affordable Alberta and Saskatchewan are expected to be in high demand this year, CREA projects. Inventory levels are already near 20-year lows there, meaning prices could have room to climb.
“For every 10 buyers, there might only be five houses,” Cathcart said of the Prairies.
CREA projects that markets such as Quebec, Manitoba and some Atlantic provinces will fall somewhere between those extremes for price and sales appreciation.
All told, CREA expects some 532,704 properties will change hands in Canada this year, representing an 8.6 per cent annual increase.
Trump tariffs loom over the economic outlook
TD Bank economist Rishi Sondhi echoed projections for rising home prices and sales in 2025 in a note to clients on Wednesday.
While that’s TD’s “baseline” forecast, he cautioned that the “macro backdrop remains highly uncertain due to tariff threats” from United States president-elect Donald Trump.
Cathcart also noted that CREA’s forecast could fluctuate depending on whether any economic impacts are realized after Trump begins his second term on Jan. 20.
“These numbers could be very different, not so long from now,” he warned.
Cathcart added that, with no clarity yet on how trade disputes would resolve, CREA’s current forecasts are intentionally “conservative.”
Soper acknowledged that it’s possible that damaging Trump tariffs send a shock through Canada’s economy that ultimately sends the unemployment rate higher and hurts homebuying prospects for many households.
But he said that any such bump in the jobless rate would happen over time, and would therefore reveal its impact on the Canadian economy over a longer time horizon — potentially skipping the spring housing market.
“It would take a wholesale downgrading of 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 trajectory that the housing markets are on currently.”
— with files from Motorcycle accident toronto today’s Kyle Benning