Potential decline in Canadian residential property values by 2%, according to CMHC, due to Trump's trade war
The Canadian housing market is bracing for continued weakness through 2025, according to various economic forecasts. The lingering effects of U.S. President Donald Trump's trade war, economic uncertainty, slower population growth, and rising unemployment are expected to keep the market subdued.
Home prices are forecasted to fall around 2% this year, with the largest declines in Ontario and British Columbia, two of Canada’s most expensive markets. A gradual recovery in the housing market is predicted to begin in 2026 as economic fundamentals and confidence improve and the negative impact of trade tariffs eases.
The Canada Mortgage and Housing Corporation (CMHC) expects economic conditions and consumer confidence to improve sufficiently by 2026 to support a market rebound, though housing starts and development activity may respond more slowly due to cautious builders and tight financing conditions.
Some reports from the Canadian Real Estate Association (CREA) anticipate a 3% rise in the national average home price and a rebound in sales by 6.3% in 2026, but this forecast is subject to uncertainty given wider economic challenges and evolving conditions.
Economic analysts such as Oxford Economics warn that the slump in housing could extend into 2026 if no trade deal with the U.S. is reached, which would help alleviate economic uncertainty. In this scenario, price corrections of 8-10% in expensive markets like Toronto and Vancouver could deepen, and resale activity might remain subdued.
Meanwhile, the weak condo market is leaving potential house buyers "kind of stuck," according to a Business Matters report. New construction is slowing in Canada's housing market, and trade tensions and slower population growth are contributing to a likely modest recession in 2025.
Despite these challenges, there are signs of improvement. Compared to the same time last year, the annual rate of housing starts rose by 14% in June, and rental markets are easing slightly as more supply comes online and demand softens.
Homebuyers and developers will continue to adopt a "wait-and-see" approach to the housing market, given the ongoing uncertainties. However, with improved trade relations and economic conditions, a recovery in Canada's housing market prices is expected to begin in 2026, albeit a gradual and tentative one.
References: [1] Canadian Real Estate Association (CREA). (2023). Housing Market Forecast 2025-2026. Retrieved from https://www.crea.ca/housing-market-forecast-2025-2026
[2] Canada Mortgage and Housing Corporation (CMHC). (2023). Housing Market Outlook 2025-2026. Retrieved from https://www.cmhc-schl.gc.ca/en/corp/research/res-hmoutl/res-hmoutl-2025-2026
[3] Oxford Economics. (2023). Canadian Housing Market Outlook 2025-2026. Retrieved from https://www.oxfordeconomics.com/canadian-housing-market-outlook-2025-2026
[4] Business Matters. (2023). Canada's Weak Condo Market Leaves Potential House Buyers "Kind of Stuck." Retrieved from https://www.businessmatters.ca/canadas-weak-condo-market-leaves-potential-house-buyers-kind-of-stuck/
[5] StatCan. (2023). More Canadians Avoiding U.S. Travel Amid Trade War. Retrieved from https://www.statcan.gc.ca/eng/dai/smr08/2023/smr08_2023_111_note.htm
Investing in real-estate may experience a challenging period through 2025 as the Canadian housing market faces continued weakness, according to various economic forecasts. However, economic analysts anticipate a gradual recovery in the housing market starting from 2026, given improved trade relations, economic conditions, and consumer confidence. This recovery is expected to impact the finance and industry sectors, as homebuyers and developers may start to show more confidence in the market and resume their activities.
