Canada’s housing sector, like much of the broader economy, has been hit by tariffs imposed by US President Donald Trump on key Canadian exports including steel, aluminum, and automobiles. Canada’s retaliatory tariffs have added further strain, leading to concerns about a modest recession extending into late 2025.
Fears over employment stability have eroded buyer confidence, especially in regions already seeing an increase in housing supply. Average prices have fallen about 3% so far this year, with expectations now for a national 2% decline by year-end, down from a previously forecasted 2% gain in March.
Toronto is forecast to see home prices drop 4% in 2025, while Vancouver’s market is expected to contract by 2%. Despite the negative outlook, economists note that some of the price correction has already occurred, suggesting a softer decline moving forward.
Sal Guatieri, senior economist at BMO Capital Markets, pointed to potential rate relief and geopolitical stabilization as possible turning points.
“We expect home prices, though likely to weaken over the next two or three months, to stabilise later this year and then to resume moderate recovery in 2026,” he said. “Now that’s all predicated on two things. One, the trade war de-escalates and two, the BoC will resume cutting interest rates—we believe by a further 75 bps reduction by early next year.”