Just kidding… no one has a working crystal ball! The Ringling Circus Museum in Sarasota Florida has one on display, but I’m skeptical it has any legitimate foretelling powers. Nevertheless, it is that time of year where we see a lot of reports from major banks, real estate firms, mortgage companies, mortgage insurers, and so on, with their prognostications for the what the real estate market will look like over the next year.
As with every year, an analysis of recent real estate sales data is conducted in tandem with an assessment of recent and anticipated regulatory changes, broader market considerations such as job reports and inflation data, political changes, and so much more to come up with a forecast for sales volumes and sale prices. Some of these are heavily focused on one area, while others consider many cities, provinces, and a national outlook. So, what can you expect?
PROJECTIONS BY MAJOR FIRMS
I’ve read numerous reports published lately by many firms. Most seem to have similar views in terms of how they think the market will perform. The Canadian Real Estate Association (CREA) projects 4.4% growth in average sale price nationally. BMO is forecasting prices will increase a modest 4% with sales picking up by 12%. TD has sales increasing by 14%.
Royal LePage anticipates prices will rise 6% nationally, while Re/Max Canada suggests the national average sale price will be up 5%, but also breaks it down regionally. For most communities in southern Ontario, their forecasts for average sale price are in the 2-6% range (i.e. 4.5% in Burlington, 6% in Mississauga, and 2.3% in Hamilton). The big exception to this is Toronto, which Re/Max believes will see price growth in 2025 of just 0.1%. This has much to do with the glut of condos currently on market with more likely to be listed (or re-listed) in spring.
The consensus is that growth will be moderate with prices rising just a few percent in many communities. Of course, many Canadians have gotten used to rapidly rising prices over much of the last 10-15 years, but it may still be some time before we again see more robust gains. I believe growth will continue to be more moderate in the coming years, even beyond 2025. In fact, the Financial Post published an interesting article on January 14, 2025, that speaks to when we might see the next housing boom. They reference information from BMO that suggests it will be 2029 before we see prices as high as they were in 2022. While this might not be the news some sellers want to hear, if this is how the next few years play out, we may see a more sustainable and balanced market, which could make home ownership less of a moving target for so many Canadians.
WHAT DO WE NEED TO WATCH OUT FOR?
Interest rates have long been something buyers pay close attention to, so with several rate cuts through the latter half of 2024, the rate environment is becoming more favourable and it’s possible interest rates may come down a little more. But, the improvements thus far have primarily been tied to variable rate mortgages, which are gaining popularity again after falling out of favour when rates rose quickly starting in early 2022. However, many Canadians are still hesitant to switch from fixed rate mortgages back to a variable, especially if they had a variable rate mortgage in 2022. So, as always, keeping on eye on interest rates will likely continue to be a theme in 2025.
There was good news in September 2024 in terms of new mortgage rules, which may help some buyers get into the market or more easily upsize their home as their needs changes. The most notable changes include longer amortization periods (now up to 30 years) for first-time buyers and buyers of new-build homes, and a higher price cap for insured mortgages (now $1.5 million) allowing buyers to qualify with a smaller down payment. It’s possible these changes
could contribute to more sales amongst buyers that benefit from these changes.
Another recent development announced by the Federal Government in October 2024 is a reduction in immigration targets for 2025-2027. RBC points out in their 2025 forecast that reduced immigration, combined with ongoing financial strains for many Canadians due to the high cost of living, will likely contribute to a restrained pace of growth in both real estate sales and prices.
And, how can we forget the threat of tariffs by soon-to-be second-term President of the United States of America, Donald Trump? While governments across Canada, provincially and federally, are working on solutions to address issues cited by Trump to curb the possibility of tariffs, it’s too soon to know whether tariffs will come into play and, if so, how they’ll impact the Canadian economy. However, it’s probably safe to say that if tariffs are broadly imposed on
Canadian exports to the USA, the effect on the Canadian economy won’t likely be positive, which could mean a muted outlook for Canadian real estate markets in 2025.
GET IN TOUCH
As your trusted resource for all things real estate, I’d be more than happy to provide you with additional insight on how to best prepare for buying and/or selling real estate. If you have any questions about the market, please reach out anytime and I can help you navigate the current market. Want a better real estate experience? Let’s chat.