Everything You Need To Know About Canada’s 2025 Housing Market

Canada's housing market in 2025 is expected to experience modest growth, with home prices projected to rise by approximately 2.8% . This follows a period of significant increases during the COVID-19 pandemic, where prices surged nearly 55%, and a subsequent 14% decline from their peak in early 2022.

Despite anticipated interest rate cuts by the Bank of Canada, which are expected to lower borrowing costs, demand for housing is likely to remain subdued. Affordability continues to be a major concern, with many potential buyers finding it challenging to enter the market. The Bank of Canada's housing affordability index indicates that affordability is at its worst since 1990.

The supply of homes is projected to increase, particularly in major cities like Toronto, Vancouver, and Ottawa. This rise is partly due to homeowners facing higher mortgage renewal rates, prompting them to list their properties for sale. However, this increase in supply may not be sufficient to meet the growing demand, potentially leading to continued affordability issues.

Government policies, including tax incentives and regulatory changes, are expected to play a significant role in shaping the housing market. Recent adjustments, such as higher price caps for insured mortgages and extended amortization periods for first-time homebuyers, aim to improve affordability. However, the effectiveness of these measures in addressing core issues like housing supply remains to be seen.

The rental market is also anticipated to face challenges, with persistently high house prices potentially increasing pressure on rental demand. This could lead to rising rents, further affecting affordability for many Canadians. Efforts to increase the availability of affordable rental units will be crucial in addressing these concerns.

In summary, while Canada's housing market in 2025 is expected to see modest price increases and some improvements in supply, affordability challenges are likely to persist. The interplay between interest rates, government policies, and market demand will be key factors influencing the market's trajectory.