Even as tariff tensions continue, major markets saw encouraging signs in July
The tariff chaos that’s engulfed the Canadian economy since the beginning of the year may be rumbling on – but signs are emerging that many hopeful homebuyers are no longer shelving their purchasing plans because of that uncertainty.
In Toronto, sales surged by 13% in July compared with the previous month thanks mainly to improving affordability on the margins, according to the city’s real estate board.
While more relief on interest rates and borrowing costs would be helpful, “it’s clear that a growing number of households are finding affordable options for homeownership,” Toronto Regional Real Estate Board (TRREB) president Elechia Barry-Sproule said in a press release.
Vancouver saw a milder pace of activity, but Greater Vancouver Realtors (GVR) suggested the tide may be turning in the city’s real estate market as buyers adjust to the new reality of economic turbulence.
Residential sales in Vancouver fell 2% last month over the same time last year, but the pace of sales decline slowed – continuing a June trend of the region “turning a corner,” according to GVR’s director of economics and data analytics Andrew Lis.
Last month, RBC assistant chief economist Robert Hogue highlighted how green shoots were emerging for various Canadian housing markets in the face of the trade turmoil.
And while Canadian and US negotiators still appear far from reaching agreement on a trade deal, the doomsday scenario feared for Canada’s economy and housing market when US president Donald Trump first unveiled his tariff plans has yet to materialize.
Tariff impact on homebuilders: less severe than first feared
The prospect of blanket levies on all Canadian goods crossing the border, and matching countermeasures imposed by the Canadian government, sparked concern that homebuilding costs could be about to spike.
But the US has rowed back on some of those tariff threats and exempted other levies on goods compliant with the Canada-US-Mexico (CUSMA) free trade agreement – and Doug Porter (pictured below), chief economist at Bank of Montreal (BMO), told Canadian Mortgage Professional the impact of the trade war had been milder than first expected when it came to home construction.
“A lot of homebuilders were talking about how tariffs were going to affect them and the stuff they import,” he said. “But when you read [recent] comments very closely, you see that there hasn’t been that big of an impact on building materials, for instance.
“And labour and land aren’t really affected by tariffs, not directly anyways. New homebuyers are still faced with all this uncertainty on where the economy is going, but I do think there’s a general sense that the downside isn’t quite as bad as many thought.”
Consumer confidence sees a cautious increase
While consumer confidence fell sharply at the onset of the trade war, the Conference Board of Canada has recorded a steady improvement in Canadians’ outlook towards the economy in recent months.
By July, the Board’s Index of Consumer Confidence had risen for the fourth month in a row, indicating a “modest rebound” in household sentiment as Canadians take a less pessimistic view towards the economy’s future amid the tariff unrest.
Among respondents to the latest survey, 49.3% expect their financial situation will remain unchanged six months from now – the highest since last November, the Conference Board said.
Barring a fresh and serious escalation in the trade war, Porter believes the housing market will likely benefit from a mild uptick in purchase activity as buyers return. Still, he cautioned against expecting a huge increase in homebuying between now and the end of 2025.
“I think we’re going to see homebuyers slowly but surely come out of the woodwork again in the months ahead,” he said. “I would not look for a big bounce back. But I think things will slowly thaw over the next year.”
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