2025 Housing Market Forecast

New mortgage rules may stoke home-buying interest.

The federal government brought in two insured mortgage rule changes for home buyers coming into effect toward the end of 2024:

• An increase in the price cap for insured mortgages from $1M to $1.5M, allowing less than 20% down payment for this price range
• First-timers and all new-build buyers can extend an insured mortgage to 30 years (from the standard 25-year amortization; added premium will apply
  

• Eligible homeowners will be able to access an insured refinance for up to 90% of their 'improved property' value (capped at a $2M home value) for construction funds and can extend the mortgage to 30 years

For the first two rules affecting home buyers, True North Mortgage reported increased inquiries almost immediately and seems to have enticed more buyers off the sidelines.

Some experts worry that the new rules might spark enough activity to pressure the existing supply and raise local home prices.

Dan Eisner, founder and CEO of True North, thinks the new rules will likely increase transactions over the next few months, but not enough to overstimulate the markets in the long term.

"First-timers finally get some help to bid on a home closer to where they might work. Home buying will likely be more attainable, with mortgage payments that are more affordable."

Despite improved access to insured mortgages, Canadians are still caught in a cat-and-mouse game over whether lower interest rates will enhance affordability — or if higher home prices and budget challenges across the table will keep a lid on demand to keep prices stable.

What could keep home prices down?

Tight home affordability in Canada has backed off a bit in the last couple of months as fixed mortgage rates and home prices cooled slightly. However, home prices in Canada are still the highest of the G7 countries (led by the major city centres of Vancouver and Toronto).

Here's what may help keep price growth in check to either deter demand or increase supply:

• High Canadian home prices in general, compelling many buyers (including first-timers) to hold off
• Increasing household non-mortgage debt
• Higher qualifying stress-test rates
• Higher city property taxes hitting budgets and mortgage-approval ratios
• A wave of mortgage renewals coming in the next 1-3 years will see homeowners paying more for their home loans (i.e. less spending room for a new house)
• For investors, if higher mortgage costs aren't passed onto renters, they may need to sell, which could increase listings
• Curbing short-term rental property ownership through restrictions and tax deterrents to release more primary housing
• Increased efforts to spur multi-housing and rental construction

A national housing crunch doesn't bode well for the future of Canadian home prices.

In 2023, we saw a whopping 46% increase in Canadian newbies waving the red maple leaf.

However, as 2024 comes to a close, immigration is being curbed, and temporary resident outflow reached over 660K this year. Increased tightening and outflow are expected in 2025 and beyond.

Still, our rapid population growth over the past couple of years, combined with not enough housing starts to keep pace, puts significant pressure on our future home supply, suggesting that home prices could go higher, not lower.

Factors that will affect the pace of homes being built:

• Higher building costs
• Higher interest rates
• Restrictive government taxes and legislation
• Fewer available labourers

Federal, provincial, and city governments are furiously trying to clear the road to increase starts or increase the incentive to increase starts.

NIMBYism (not in my backyard) is another major obstacle in the way of slapping up multi-dwelling housing in existing neighbourhoods to ease the strain. (Calgary and Edmonton seem to have less trouble getting shovels in the dirt — both these cities have led national starts for months now.)

Many forces in Canada seem to be at odds, interfering with the pace of the Canadian housing inventory needed to keep up with current and future needs. We're not talking here about housing for low-income needs, which is also very urgent and essential — we're talking about enough housing to meet the general demands of an existing and growing population.

Canada is already down over 5 million homes needed by 2030 (on top of annual construction). The lack of inventory won't help stabilize home prices unless reasonably addressed in the coming years.

Rate drops and home price drops: can they co-exist?

One can hope (though it's likely destined to be an unrequited love).

How home prices are viewed depends on the perspective: Many buyers want prices to go down, but sellers want them to stay higher (for obvious equity reasons).

Yet home affordability is at an all-time low in Canada, with high home prices (still down only about 17% from the 45% peak of March 2022), higher interest rates, and elevated prices all around.

Here's what can help rate and price drops co-exist:

• As rates drop, buyers entering the market could meet plenty of sellers listing to match demand
• Despite rate drops, buyers' budget constraints may still keep them out of the market or unable to afford bidding wars (keeping a limit on local price increases), or they'll buy a smaller (cheaper) home
• If more sellers suddenly (and continually) list without a corresponding surge in buyers, prices could decline as sellers look to unload their properties

Sellers have to consider renewal mortgage rates and their home's potential sale price when making their move to list. Offloading short-term rental or investment properties that are no longer financially feasible is already bringing more homes onto the market.

As rates decline, buyers and sellers cancelling each other out would be the best scenario to keep prices from skyrocketing as demand increases.

Housing Hot Takes:

• According to the CMHC, roughly 85% of fixed-rate mortgages are coming due in 2025 that were contracted when the Bank of Canada rate was at or below 1%
• Some realtors are willing to offer a cashback rebate to home buyers to reduce commissions that have soared alongside housing prices
• It's estimated that 83% more on-site construction workers are needed (that's nearly half a million people) over the coming decade to meet building-demand needs
• Québec's clampdown on Airbnbs doesn't seem to have much teeth, with only 2 fines and over 47% of unregistered short-term rentals
• To build a semi-detached house in Toronto — development charges have risen nearly 400% in a decade, and include more than $4K for a subway extension that opened in 2017
• Over the past 5 years, rents in Canada grew by an average of 3.4% per year, making it harder for first-timers to save enough down payment
• "There will be a growing gap between [prices of] detached houses and condos." — Globe & Mail, Benjamin Tal (CIBC)
• Canmore, Alberta is moving to phase out 'tourist' homes, with 26% of properties (and growing) already not primary-resident occupied
• About 49% of Canadians said they would consider buying a home through non-traditional means (like rent-to-own and co-ownership) in a Re/Max survey
• Households under age 35 that owned a primary residence rose almost 9% to 44% from 2019 to 2023 — until rapid rate hikes and higher home prices challenged home affordability
• Canada needs to build 5M extra units by 2030 on top of annual construction (Benjamin Tal, CIBC deputy-chief economist, Feb. 6, 2024)
• The GTA has seen a 112% increase in power of sales in the last year as more homeowners struggle to pay their mortgage

How much home can you afford?

Use our great calculator below for an idea, then give us a shout for your numbers.

Are we in a housing bubble?

Despite higher rates, national average home prices in Canada are among the highest in the G7 countries. There's been talk of housing bubbles here for years. Yet, nothing has burst (yet), and homeowners take tremendous pride in owning a home, riding local price waves up or down.

To help you time your home-buying or selling decisions, here's a snapshot of our nation's current housing market trends and a look ahead to what experts say is coming to a market near you.

Buyer's or seller's market?

BALANCED – The national SNLR (sales to new listing ratio) tightened to the high end of a 'balanced' market to 59% in November from 57% last month.

More buyers came to the curb, drawing down supply (though the new inventory decline of 0.5% was slightly less than October's -3.5% ).

A few other details:

• Nationally, November inventory listings measured 3.8 months worth (it was 4.1 this past September)
• Long-term average for inventory listings is 5 months (according to CREA)
• The highest national SNLR so far was 67.9%, reached in April 2023
• Long-term average for the SNLR is 55.1%

Why is the market balance tightening? Many buyers have been looking this Fall but didn't find their deal until after September brought in more choices through increased market listings. Is more inventory coming on board from over-leveraged homeowners or those wanting to get their home sale over and done by year-end? Will buyers take a winter break or continue to buy ahead of a projected busy Spring 2025? Check back next month for an update!

Market disparity? Always. Regardless of national or even provincial sales and listing averages, Canada is a big country (area-wise), and home shoppers and sellers can find very different market conditions depending on where they're buying or selling.

What is a buyer's market?

According to CREA (Canadian Real Estate Association), a strong buyer's market is when the sales-to-new-listings ratio (SNLR) is 40% or below.

At that ratio percentage, there are typically more properties for sale than buyers, offering more choice and bargaining power — especially in placing purchase offers with conditions that protect a buyer's rights and finances.

What is a balanced housing market?

When the SNLR falls between 40% and 60%, market conditions are considered 'balanced' in buyer demand, available listings, and sales levels that keep prices relatively stable, thus allowing reasonable purchase and sale terms.

The middle ground of housing competition — balanced markets can lean more towards the buyer's or seller's spectrum. And despite any prevailing national or local trends, a particular house, street or area can defy it (you know who you are).

What is a seller's market?

An SNLR of 60% or higher is a market that strongly favours the seller.

A seller's market means there are more buyers than sellers, and the properties sell quickly and at higher prices, giving the seller more power to set their price and terms of sale.

When the demand for housing exceeds supply, buyers often resort to a gamut of strategies to snap up a house before others, such as engaging in bidding wars or feeling pressured to place no-condition offers.

Need a mortgage with that house? That's where we come in.

Our friendly, highly trained brokers can help you get the best rate and better mortgage options, saving you thousands.

We can also offer unbiased advice for first-time and next-time buyers for affordability strategies that may make the difference in owning and keeping a home in Canada.

Make sure to ask about features such as portability, free payment frequency changes and mortgage recasting, as well as products like Purchase + Improvements when looking to buy your next home.

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