Market Outlook for 2025

It’s a new year, and as we gear up for the upcoming Spring season, it is a good idea to take a look at the market outlook and what we are expecting to see around housing sales, prices, interest rates, and how these current conditions affect buyers versus sellers!

Let’s dive into the Canadian Real Estate Association Forecast and more:

National Trends

Housing Sales

National home sales are expected to increase by 6.6% in 2025, reaching approximately 499,800 units as interest rates continue to decline, drawing buyers back into the market. This follows a modest 5.2% increase in 2024.

Housing Prices

On a national level, Canada’s housing market is expected to see a 4.4% increase in home prices in 2025, reaching an average of $713,375. This follows a more modest 0.9% increase in 2024. The national growth is tempered by regional differences, with areas like Toronto and Vancouver seeing higher price levels due to ongoing demand, while more affordable regions like Quebec may see more moderate growth.

Rising Demand

Canada’s housing market remains competitive, with demand continuing to rise in urban centers and suburban areas due to factors like population growth, economic recovery, and strong immigration.

Interest Rates

The Bank of Canada’s policy on interest rates continues to play a central role in shaping the housing market. While rates were higher through 2023 and part of 2024, they are expected to continue declining in 2025, which should ease affordability constraints and encourage more buyer activity.

Regional Highlights

Greater Toronto Area (GTA)

Housing Prices

The average home price in the GTA reached $1,135,215 in October 2024, reflecting a 0.8% increase year-over-year and 2.5% monthly growth. The City of Toronto itself saw a 3.4% increase, signaling continued demand despite higher prices.

Rising Demand

Toronto remains one of Canada’s most sought-after markets, driven by its status as a global financial hub and growing tech sector. Suburbs like Mississauga, Brampton, and York Region are seeing rising interest as buyers seek more affordable options.

Interest Rate Impact

Rates are expected to decrease into 2025, increasing buyer demand. Despite higher rates over the last two years, Toronto remains a seller’s market in many areas.

Greater Vancouver

Housing Prices

Vancouver has experienced a slight decline in average home prices, down 0.2% year-over-year in 2024, with prices hovering around $1,250,329. However, some recovery is expected as the market adjusts.

Rising Demand

Vancouver’s appeal remains strong for both domestic buyers and international investors, particularly in tech, entertainment, and natural resources sectors.

Interest Rate Impact

Like Toronto, Vancouver has been affected by the Bank of Canada’s interest rate hikes. The region is expected to see a modest recovery in 2025 as rates decline.

Quebec

Housing Prices

The province has seen steady growth in home prices, with Montreal experiencing an 8.9% year-over-year price increase as of October 2024, reaching an average home price of $630,063.

Rising Demand

Montreal’s job market, particularly in technology and aerospace, continues to attract young professionals, fueling housing demand.

Interest Rate Impact

Quebec will see easing interest rates in 2025, which should help bolster market activity, though some affordability challenges may remain.

Expectations for Buyers

• Affordability Challenges: High housing prices in major cities will still be a challenge, but lower rates may ease monthly mortgage payments.
• Opportunity in the Suburbs: Suburban areas may offer better value for first-time buyers and those seeking affordability.
• More Inventory: An increased number of homes for sale could provide buyers with more choices.

Expectations for Sellers

• Tight Timing: Sellers will benefit from increased demand in the spring and summer.
• Realistic Pricing: Sellers will need to price homes competitively as buyer conditions improve.
• Stronger Negotiation Power in Suburbs: Sellers in high-demand suburban areas may enjoy favorable conditions.

Key Takeaways for 2025

Recovery Driven by Rate Cuts: Declining interest rates are anticipated to accelerate sales and price growth in late 2025.

Regional Disparities: While Toronto and Vancouver remain expensive, regions like Montreal offer growth potential due to affordability.

Inventory and New Construction: Higher inventory may moderate price increases, but regional dynamics will vary.