Canadian housing market returns to stability, prices expected to rise 6% in 2025:
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The Canadian housing market is expected to experience some stability in 2025 as low interest rates and new lending rules bring buyers back into the market, according to Royal LePage Market Survey forecasts. The firm predicts that the median home price in Canada will increase 6% annually to $856,692 in the fourth quarter of 2025, in line with long-term trends.
Single-family homes are expected to see a 7% price increase, reaching a median value of $900,833, while condo prices are expected to increase 3.5%, reaching $605,993. "The number of willing and able buyers continues to grow and upcoming changes to mortgage lending rules will further strengthen Canadians' borrowing power," said Phil Soper, president and CEO of Royal LePage.
The Bank of Canada's recent shift in monetary policy from "fighting inflation" to "stimulating the economy" has been a major driver of this optimism, Soper said. "We saw a significant increase in market activity at the start of the fourth quarter, following the Bank of Canada's 50 basis point rate cut," he notes, adding that most buyers believe home prices have risen.
Regional price trends will reflect strong demand
Forecasts call for price increases in all major Canadian markets, with Quebec City leading the way with a projected price increase of 11%. Edmonton and Regina follow with projected gains of 9% each. Meanwhile, Greater Montreal is expected to see a 6% increase, outpacing the moderate 5% growth in the Greater Toronto Area and 4% in Metro Vancouver.
"In recent months, supply has increased in the Toronto and Vancouver real estate markets as sellers responded to the first interest rate cuts by listing their homes. "However, while home prices in these cities have been high, many foreclosed buyers have continued to wait for more favorable lending terms," says Soper.
"The stability of home prices also reduced the urgency often driven by the fear of 'missing out,' creating a temporary impasse where inventory remained and buyers were reluctant to act. By mid-fall, this dynamic began to change as buyers returned to the market."
Expanded lending rules should help first-time buyers
New mortgage rules that take effect on December 15, 2024, aim to provide better access to housing for first-time and new home buyers. These changes include eligibility for 30-year amortization for insured mortgages and an increase in the mortgage insurance limit from $1 million to $1.5 million. "First-time buyers will be the biggest beneficiaries of these initiatives, as their ability to borrow more for less with a lower down payment will help them get closer to buying a home sooner," Soper said. "We believe the return of buyers to the market will encourage builders and trigger a much-needed new wave of supply."
Political and Economic Factors
There is a risk of disruption from political changes, both domestically and in the United States. New housing policies following the federal election in Canada, as well as the Trump administration's new trade agenda in the United States, could have ramifications for the Canadian real estate market, Mr. Soper says.
Outlook for 2025
The strongest quarterly gains are expected in the first quarter of 2025, driven by an early spring market. National home prices are expected to increase 2% between the fourth quarter of 2024 and the first quarter of 2025, followed by more moderate gains of 1.5% in the second and third quarters and 1% in the third quarter to end the year. of the year.
Soper predicts that 2025 will bring a level of normality: "After several years of unusual volatility in the real estate market, leading indicators point to a return to stability in 2025."
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