Record Housing Demand Expected to Boost Sales in 2025
Canada’s housing market is poised for a significant surge in demand as interest rates are expected to stabilize, according to the Canadian Real Estate Association (CREA). The association anticipates a substantial increase in buyer activity driven by a record number of prospective homebuyers currently waiting on the sidelines, hoping for more favorable financial conditions. Shaun Cathcart, CREA’s senior economist and director of housing data and market analysis, highlighted the key driver: “The big assumption we have is that there is a record amount of demand out there on the sidelines.” This expectation is fueled by population growth and the demographics of Canada, specifically the 25 to 35 age cohort, which represents the largest demographic group and is predominantly comprised of first-time homebuyers.
The anticipated rebound stems from the belief that interest rates will reach a bottom this year, offering more attainable mortgage rates. However, the CREA cautions against expecting a return to the extreme conditions seen during the COVID-19 era, emphasizing that prices are still considerably higher than pre-pandemic levels and that interest rates are not returning to their lowest points. This nuanced outlook reflects a recognition of the long-term cyclical nature of the housing market.
The regional variations within Canada are shaping up to be a key determinant of market performance. In British Columbia and Ontario, where inventory levels are relatively high and prices are already elevated, a more pronounced recovery is anticipated. The expectation is that increased buyer interest will eventually translate into stronger sales volume. However, the recovery is anticipated to be more gradual than in other parts of the country. In the Prairies, where housing inventory is at a 20-year low and sales figures are already at a record high, CREA doesn’t foresee a dramatic shift, though further growth in sales is expected. The Eastern provinces represent a different story, with room for both sales and price growth due to expanding housing inventories.
The national average home price is projected to reach $722,000 in 2025, representing a 4.7 per cent increase from the previous year. One significant potential impediment to sales growth is the possibility of a trade war between Canada and the United States, which could have substantial economic repercussions, including job losses and increased financial uncertainty, a “housing market killer” according to Cathcart.
Housing supply remains a persistent challenge. The Canada Mortgage and Housing Corporation (CMHC) estimates a shortfall of 3.5 million housing units to meet the country’s growing housing needs, while the Parliamentary Budget Officer suggests a figure of 1.3 million. The Conservative party’s pledge to eliminate the Goods and Services Tax (GST) on new homes sold for under $1 million is viewed as a potentially effective stimulus, but its impact remains to be seen. Another factor, according to Cathcart, is the shift towards purpose-built rental apartments, reflecting a move away from traditional single-detached homes – a trend that reflects the increasingly diverse housing needs of the Canadian population. The “missing middle” housing type – a mix of housing sizes – is considered a critical area for increased development.
Furthermore, the CMHC estimates that Canada is still short 3.5 million housing units to meet the country’s growing housing needs, while the Parliamentary Budget Officer suggests a figure of 1.3 million. The Conservative party’s pledge to eliminate the Goods and Services Tax (GST) on new homes sold for under $1 million is viewed as a potentially effective stimulus, but its impact remains to be seen. The CMHC estimates that Canada is still short 3.5 million housing units to meet the country’s growing housing needs, while the Parliamentary Budget Officer suggests a figure of 1.3 million. Looking ahead, the market is influenced by several complex factors, including ongoing economic trends, interest rate movements, and government policy. Maintaining a cautious outlook is paramount, recognizing that shifts in the broader economic landscape could significantly impact the trajectory of the Canadian housing market. It’s a market characterized by considerable uncertainty and reliant on several interwoven elements to achieve a balanced and sustainable recovery.
