Many buyers are waiting to see what happens with tariffs before making their moves
Canada’s housing market isn’t exactly roaring as 2025 nears an end, with October home sales inching slightly up over the previous month but slipping on a year-over-year basis.
The Canadian Real Estate Association (CREA) said on Monday that sales increased by 0.9% across the country compared with September, while house prices saw a tiny monthly increase but fell from 12 months prior.
That continuing sluggishness suggests that plenty of buyers are still waiting to see what’s in store for the economy – and whether Canada and the US can strike a deal to end the ongoing trade war, according to Royal LePage vice president, research and communications Anne-Elise Cugliari Allegritti.
She told Canadian Mortgage Professional that while buyers have seen some borrowing relief thanks to a series of Bank of Canada interest rate cuts since mid-2024, that trade dispute continues to loom over the market and cloud the housing outlook.
“We’ve seen borrowing rates improve dramatically over the last two years and we know that in markets that have typically been very undersupplied, there’s lots of inventory available,” Cugliari Allegritti said. “All of those components are working in favour of buyers.
“What’s really holding them back is this uncertainty in the economy. There’s some hesitancy because of the trade dispute with the US. I think what’s really going to change that is some certainty, some sort of vote of confidence from our government that a trade deal can be made or is in the works.”
Are buyers getting used to the new reality of trade tensions?
The good news: while the trade dispute has negatively impacted Canada’s economy and housing market, it’s yet to trigger the full-blown recession many had forecast when US president Donald Trump launched his first wave of tariffs earlier in the year.
Canadians aren’t exactly optimistic the trade war is winding down anytime soon: new polling by Nanos Research showed 67% of respondents view a tariff deal as unlikely within the next six months.
But they may be calmer about the outlook because a sharp downturn hasn’t transpired yet – and Cugliari Allegritti said many will also realize that they can’t postpone their home purchasing plans indefinitely because of the trade turmoil.
“Eventually, as more time goes on, every month we’ll probably continue to see a little bit more stability in the market,” she said. “As time goes on, people will just sort of get used to the new normal and eventually just say, ‘Well, I need to get on with my life. I was able to put off buying a home for six months or eight months a year, and now I need to move on.’”
The BoC might be done for now on rate cuts
What’s more, the seeming likelihood that the Bank of Canada is done lowering rates for now could also impel buyers off the sidelines.
When the central bank was in rate-cutting mode, Cugliari Allegritti said, some hopeful homebuyers might have been tempted to wait and see how far its benchmark rate fell before making their move.
But all the sounds coming out of the Bank suggest that it’s at or near the end of its rate-cutting path, with governor Tiff Macklem indicating after its October decision that he viewed the current policy rate as appropriate.
And while inflation slipped last month, according to Statistics Canada’s latest release, many economists view core measures as too sticky to justify a rate cut in December.
“The Bank of Canada has given us every indication that they’re pretty comfortable with where rates are right now,” Cugliari Allegritti said. “Inflation has held steady in a very comfortable place in terms of their target range. So barring any need to stimulate the economy in a really material way, I think we’ve pretty much reached the bottom of borrowing rates.
“I don’t think anyone’s expecting massive cuts from here on. And that’s something that can also bring more buyers into the market. It’s possible that some of them were just sort of waiting for the lowest possible lending rate – and if they’re confident that this is as good as it’s going to get for the foreseeable future, we may start to see some other buyers come off the sidelines as well.”
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