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The housing market is showing some signs of growth, but caution remains, according to a recent report. It points to the uncertainty surrounding a potential trade war with the U.S. as a key concern. RBC Economics warned that U.S. tariffs on Canadian exports could hinder the housing recovery.

On a more positive note, demand has been picking up recently, fueled in part by lower mortgage rates. There’s also been an increase in housing inventory across Canada since 2021, though it still falls short of long-term averages.

In terms of ownership costs, they remain higher than typical, making up around 52% of household income. While this is an improvement from the peak in 2023, where it reached nearly 64%, it still exceeds the levels seen in the 2000s and 2010s.

The decline in immigration levels presents both challenges and opportunities for the housing market. While fewer immigrants may reduce demand and help moderate prices, it could also lower sellers' confidence in the market.

Looking ahead, RBC forecasts that home sales will likely remain close to historical averages, thanks to lower interest rates. Property values are expected to increase modestly through 2027. Alberta is projected to see growth, with prices and sales rising by 4-5%, while British Columbia and Ontario are expected to experience stable conditions.

RBC also cautioned that a trade war with the U.S. could lead to economic instability and job losses, potentially reducing demand even further. However, this could also prompt the Bank of Canada to lower interest rates even more, which would make mortgages more affordable and homes within reach for more buyers.

Toronto's real estate market may still be one of the most unaffordable in the world, but it's seen a noticeable decline over the past year. While the biggest drops have been in the condo market — which has suffered after its peak driven by investors — there's now an abundance of listings, giving buyers a lot more options.

Though prices have remained relatively flat due to a lack of significant activity, there’s still room for negotiation. In fact, several neighbourhoods are seeing even detached homes fall below the crucial $1 million mark.

A recent market analysis has shared a list of these more affordable areas, which are perfect for anyone looking to buy on a budget.

The cheapest place in the GTA for single-family homes right now is Central Oshawa, where you can snag a house for about $655,000 — less than the cost of a typical condo in most of the region, including downtown Toronto. Other affordable spots in Oshawa include Eastdale-Donevan and Windfields, with median home prices of $760,000 and $782,500, respectively.

By comparison, the average price for a detached home in the GTA was around $1,377,430 in January 2025, while a semi-detached home is about $1,047,728. In the 416 area, those numbers jump to $1,579,386 and $1,154,505, respectively.

The analysis also found that out of over 400 neighbourhoods, only 53 had single-family homes selling for under $1 million. Additionally, 64% of prospective buyers said they’d prefer a house over a condo.

In January 2025, Canadian MLS® Systems experienced a notable increase in new home listings, up by double digits compared to December 2024. However, sales activity slowed towards the end of the month, likely due to concerns about a potential trade war with the U.S.

Although sales dropped by 3.3% month-over-month in January, most of the decline was due to a slowdown in the final week of the month. On the other hand, new listings surged by 11% compared to December, representing the largest seasonally adjusted monthly increase in new supply since the late 1980s, excluding the pandemic period.

With sales slowing and new listings rising, the national sales-to-new listings ratio dropped to 49.3%, down from the mid-50s in the last quarter of 2024. A balanced market typically has a ratio between 45% and 65%, with the long-term average around 55%.

By January’s end, about 136,000 properties were listed across Canadian MLS® Systems, a 12.7% increase from the previous year, though still below the usual 160,000 listings for this time.

At the close of January, there were 4.2 months of inventory nationwide, an increase from the high 3s in late 2024. The long-term average is five months, with a seller’s market below 3.6 months and a buyer’s market above 6.5 months.

The National Composite MLS®  has remained relatively stable over the past year, with price softness in B.C. and Ontario offset by rising prices in the Prairies, Quebec, and the East Coast.

The national average home price stood at $670,064 in January 2025, a 1.1% increase from January 2024, marking the first year-over-year rise since March 2024, though modest.

In January 2025, Canadian MLS® Systems saw a significant 11% increase in new listings compared to December 2024, marking the largest jump since the late 1980s (aside from the pandemic). However, sales slowed toward the end of the month, likely due to concerns over a potential trade war with the U.S.

Sales dropped 3.3% from December, mainly in the last week of January. Despite the dip in sales, the number of homes listed increased. This combined with fewer sales has softened the market, particularly in British Columbia and Ontario, according to CREA’s Senior Economist.

The national sales-to-new listings ratio fell to 49.3%, down from the mid-to-high 50s in late 2024. Historically, this ratio hovers around 55%, which suggests the market is shifting toward a more balanced situation.

By the end of January, there were nearly 136,000 homes listed, up 12.7% from last year but still below the long-term average of 160,000 listings for the time of year.

Looking ahead, while uncertainty over tariffs may hold some buyers back, others might benefit from a softer pricing environment and lower interest rates. Those considering buying or selling in 2025 should consult a local REALTOR® for guidance.

Nationally, inventory rose to 4.2 months, slightly above the long-term average of five months. In terms of home prices, the National Composite MLS® Home Price Index remained nearly unchanged, down just 0.08% from December 2024. Year-over-year, the national average home price reached $670,064, a 1.1% increase from January 2024.

Montreal’s real estate market has started 2025 strong, completing a two-year recovery. January saw both sales and prices rise, reinforcing the city’s status as one of Canada’s top housing markets.

Sales Return to Pre-Pandemic Levels

Resale transactions have surpassed 54,000, bringing activity back to pre-pandemic levels. The Quebec Professional Association of Real Estate Brokers (QPAREB) reported 2,812 residential sales in January 2025, a 36% increase from the previous year. Single-family homes on the Island of Montreal saw a notable 55% rise in sales.

Tight Inventory Gives Sellers the Advantage

As more buyers return, the number of listings remains low. Despite a seasonal 11% rise in new listings, inventory is down by 4%, keeping sellers in control of price negotiations. Areas surrounding the Island of Montreal are particularly tight, with less than four months of inventory available.

Prices and Demand Keep Rising

Home prices continue to climb. In January, the median price of single-family homes rose more than 10% year-over-year, while condos increased by nearly 8%. This upward trend is expected to continue through 2025, possibly accelerating.

Interest Rates and Market Sentiment

The market rebound is supported by recent interest rate cuts and new homeownership initiatives. Many buyers who had been waiting are now re-entering the market. While some economic uncertainty has affected consumer confidence, trade developments with the U.S. could lead to further rate cuts, boosting buyer support.

Some developers warn that impending U.S. tariffs on Canadian steel and aluminum could significantly harm the housing sector by raising the costs of essential construction materials. A trade association representing over 4,000 companies involved in development and renovation expressed concerns that the tariffs might trigger an economic slowdown and reduce investment in residential real estate.

The group’s leadership cautioned that this could deal a "brutal blow" to the housing market and worsen housing affordability. They pointed out that in an environment already affected by low profit margins, high interest rates, and rising input costs, additional cost increases could make builders anxious. The situation was described as creating "chaos" in the development market.

On Monday, U.S. President Donald Trump signed an executive order imposing a 25% tariff on steel and aluminum imports, set to take effect on March 12. Trump has also threatened to impose a 25% tariff on a wide range of Canadian imports, including a 10% tariff on Canadian energy, though he has delayed these actions until at least March 4 in connection with border security commitments.

The concern is that rising construction material costs would push up home prices in Canada, which are already under pressure due to inflation. Costs for materials like lumber increased during the pandemic and have not returned to pre-COVID levels. Reducing U.S. demand for Canadian products could lead to less production, which would, in turn, raise prices domestically.

Additionally, retaliatory tariffs could further drive up costs, as Canada exports about $20 billion worth of steel and aluminum to the U.S. annually. There are fears that if tariffs extended to other construction materials like cement, gypsum, and lumber, costs could skyrocket, making construction projects unfeasible.

While Canadian builders may still be able to construct homes, the rising costs could make them less affordable for many consumers.

In 2024, Calgary homebuyers needed a lower annual income to qualify for a mortgage on an average-priced home compared to the previous year. The report showed that buyers in Calgary saw a reduction in income needed to qualify for a mortgage with a 20% down payment and a five-year fixed mortgage.

 At the beginning of 2024, a Calgary buyer needed to earn about $116,000 a year to qualify for a mortgage with a 5.71% interest rate, factoring in the federal stress test (which required the buyer to afford a 7.71% rate). By December 2024, that same buyer needed only $113,500 a year, even though the average price of homes in Calgary had increased. At the start of the year, the average home price was $572,400, and by the end of 2024, it had risen to over $605,000.

 Other cities saw similar trends. In Toronto, buyers needed $12,400 less in annual income, despite a slight drop in home prices. In Vancouver, buyers needed $12,100 less, with an income requirement of $216,700 to purchase a home priced at $1,171,500.

 On the other hand, Edmonton experienced an increase in income required by the end of 2024. Buyers there needed $83,330, up by $1,050 from earlier in the year, to qualify for a mortgage on a home priced around $435,000.

 A city in New Brunswick, experienced the biggest increase, with a $6,130 rise in income requirements to $73,640, partly due to a significant $54,000 jump in average home prices, which reached $325,000.

Emerging Trends in Real Estate, an annual report by PwC and the Urban Land Institute, surveys real estate professionals globally to identify trends in investment, development, and markets. The 2025 report highlights Calgary as a rising star in real estate investment, ranking No. 1 for overall prospects due to its growing tech sector and strong population growth. Calgary’s CMA added nearly 96,000 people in the past year, with a third coming from interprovincial migration.

The report notes the greatest investment opportunities are in Calgary’s single-family and multi-family markets, with housing starts reaching a record 24,369 in 2024. Despite rising construction costs, the city’s relatively affordable housing continues to attract people, though increasing demand is expected to push rents up by 3.4% in 2025. Still, average rents remain lower than Toronto or Vancouver.

While Calgary’s office space vacancy rate hit 30.3% in 2024, the city is addressing this with a program to convert office buildings into residential and mixed-use spaces, offering funding to developers. The industrial market remains strong, with a 3.3% vacancy rate, and Calgary’s role as a distribution hub for Western Canada is expected to drive continued demand.

With another record year of housing starts expected in 2025, Calgary’s development initiatives should help ease housing pressures, especially for first-time buyers and renters.