The combination of more than two years of pent-up housing demand and lower borrowing costs will lead to a rebound in sales across Canada in 2025, the Canadian Real Estate Association (CREA) said in its market forecast for 2025 and 2026 released Wednesday.
The national average home price is forecast to climb 4.7% to $722,221 this year and 3.3% to $746,379 in 2026, the report said.
The big factors are mortgage rates and the assumption that buyers are waiting for the right conditions to enter the housing market, Shaun Cathcart, senior economist and director housing data and market analysis at the CREA, said in a press conference in Ottawa. The Bank of Canada’s policy rate stands at 3.25%, with its next decision to be announced Jan. 29.
“[Buyers] are looking for the best interest rate they’re going to get, which is soon; they’re looking for a whole bunch of inventory to come out, which is April; and they’re looking for the lowest home price they’re going to get, which is now,” Cathcart said.
While the outlook is rosy, the association has been conservative about its year-on-year growth forecasts as there are many unknowns, Cathcart said. Major uncertainties include the potential for the U.S. to impose new tariffs on Canadian goods and the possibility that a Conservative government could eliminate GST for homes under $1 million.
Meanwhile, weak economic growth, steady employment growth and slow income growth will have a neutral effect on housing, he added.
On the flip side, foreclosures in Canada are still very low. After 90-day arrears have risen since reaching a record low of 0.14% in fall 2022, but the rate remains under pre-pandemic levels. Lower interest rates will help ease concerns about a mortgage renewal cliff this summer. “Nine months ago, rates were expected to take three years to get down, and now we’re basically there today,” Cathcart said.
Ontario and B.C. have the most housing inventory and will see the lowest average price increases this year at 1.8% and 2%, respectively. The Prairies, however, have seen a sales boom with inventories at a 20-year low, Cathcart said. Home prices in Quebec and Alberta are expected to rise the most – by 8.4% and 8.3%, respectively.
“While housing market activity may take a breather over the winter with fewer properties for sale, the fall market rebound serves as a good preview of what could happen this spring,” CREA chair James Mabey said in a news release.
“Spring in real estate always comes earlier than both sellers and buyers anticipate. The outlook is for buyers to start coming off the sidelines in big numbers in just a few months from now.”
With files from the Canadian Press.