Will Home Prices Drop in Canada? 2025 Housing Market Forecast
Are home prices in Canada on the decline? It’s the question everyone—from buyers and sellers to savvy investors—is asking. With 2025 kicking off, the real estate scene is evolving once again. The past few years have been anything but predictable, with housing prices soaring to record highs one minute and taking surprising dips the next. So, where do things stand now? Let’s dive into the latest Canadian housing market trends to help you navigate this ever-changing landscape.
The state of the Canadian housing market today
The Canadian housing market has seen its fair share of ups and downs. In March 2024, the national average home price dipped slightly, according to the Canadian Real Estate Association (CREA). Looking ahead, though, experts predict that home prices will start climbing again in 2025.
Housing market trends can look very different depending on where you are and the type of property you’re looking at. In bustling cities like Toronto and Vancouver, prices are still holding strong. Meanwhile, smaller towns and rural regions have experienced more noticeable price shifts. These differences highlight the importance of location when assessing whether home prices are actually falling.
Forecasting Real Estate: What Factors Influence Home Prices?
Many factors play a role in shaping home prices in Canada. By understanding them, you can better predict where the market might be headed. Let’s break down some of the most important economic drivers behind these changes.
Mortgage rates and interest rates
Interest rates have a big impact on home prices. When rates are low, borrowing becomes more affordable, which boosts demand and pushes prices higher. On the flip side, higher rates make mortgages more expensive, often slowing down the market. The Bank of Canada’s decisions on interest rates play a key role in shaping these trends.
Looking ahead to 2025, experts believe interest rates might level off or even dip slightly, which could give the housing market a boost. Fixed mortgage rates are especially important for first-time buyers, making it crucial to keep an eye on these shifts. However, if rates rise, it could put more pressure on housing affordability.
Demand and supply
Canada has been dealing with a shortage of homes, particularly in cities. With demand far outweighing the available supply, home prices have been pushed higher. However, as more housing becomes available, we could begin to notice prices easing.
Efforts to boost the housing supply through new construction and policy changes could make a difference. However, building new homes takes time, and with demand still strong, both buyers and real estate agents need to keep this in mind when looking to purchase a property.
Economic factors
The state of the economy, including things like inflation, wage growth, employment rates, and GDP, plays a big role in the housing market. When the economy is strong, home prices tend to rise, but during slowdowns, prices often fall. Economists are generally hopeful about Canada’s economy in 2025, but global factors and possible recessions could still have an impact on the housing market.
Government policies
Government policies at both the national and provincial levels can have a big impact on the housing market. Measures like foreign buyer taxes, mortgage stress tests, and incentives for first-time buyers all play a role in shaping market conditions.
Changes in policies or new ones can push prices up or down. When looking at the market, it’s important to consider the current federal funds rate. Stay informed about government actions that could impact housing prices and affordability.
The new mortgage reforms introduced on December 15th are set to affect homeownership costs. Aimed at making homeownership more accessible for younger buyers, these changes could offer longer mortgage terms. First-time buyers and those purchasing new homes can now access 30-year amortization periods. Additionally, homeowners with insured mortgages may not need to go through another stress test if they choose a new lender when their mortgage comes up for renewal.
Are home prices declining in Canada?
So, are home prices dropping in Canada? It’s not a simple yes or no. While there’s been some cooling, especially when compared to the highs we’ve seen recently, the trends vary depending on the area and the type of property.
In cities like Vancouver and Toronto, which have been heating up, prices are stabilizing rather than dropping significantly. Meanwhile, other areas may experience more noticeable price declines, with sales prices becoming more reasonable and the median sale price decreasing.
Real estate is all about location. National trends don’t always reflect what’s happening in your area. To get an accurate picture of local home prices, it’s best to speak with real estate experts in your target market. Whether you’re buying or selling, staying informed about your local market is key to making smart decisions.
Average home prices in Canada by region
The table below shows the average home prices in different regions of Canada. Keep in mind that these numbers can change quickly, and prices are likely to keep fluctuating. Be sure to check the most current data when making decisions, as housing inventory levels can impact costs.
Region | Average home price (2024) |
Ottawa | $668,690 |
Calgary | $620,946 |
Montreal | $630,063 |
Greater Vancouver Area | $1,250,329 |
Greater Toronto Area | $1,135,215 |
Will 2025 be a seller’s or buyer’s market?
Experts say that market conditions will differ across Canada, so it won’t be a clear buyer’s or seller’s market everywhere. This means that neither buyers nor sellers will have a definite advantage—it will depend on local trends and the specifics of each negotiation.
- Home Prices: Home prices are projected to increase by about 4.4%, bringing the national average to around $713,375. While this isn’t a dramatic jump, prices are still rising steadily.
- Home Sales: CREA predicts a 6.6% rise in home sales, reaching around 499,800 units in 2025. This means more people will be buying and selling homes compared to recent years.
Several factors are helping to stabilize the market:
- Economy: Economic growth is expected to grow gradually, which should boost confidence and encourage more people to invest in homes.
- Interest Rates: The Bank of Canada may cut interest rates in 2025, making it cheaper to borrow and potentially drawing in more buyers.
- More Homes for Sale: With new listings expected to match demand, we’re likely to see stable prices without significant increases or decreases.
This is the overall trend, but some areas—like cities with strong job growth or a lot of newcomers—might lean more towards being a seller’s market. On the other hand, regions with slower growth could work in favor of buyers.
Although some areas are becoming more buyer-friendly, the national average home price is still expected to rise by 5% in 2025. This means affordability will likely continue to be an issue, even in markets that appear better for buyers. While there may be some opportunities, finding affordable housing overall could still be challenging.
Getting ready for the 2025 housing market
Whether you’re buying or selling, being well-prepared for the 2025 housing market is essential. Here are some important things to keep in mind, especially in a market that’s constantly changing and full of complexities.
If you’re planning to buy
- Start saving. A solid down payment strengthens your buying power and can lead to better mortgage terms.
- Get a mortgage pre-approval. This helps define your budget and positions you as a more attractive buyer. Don’t forget about closing costs—they can catch you off guard, so it’s wise to plan for them in advance.
- Research regions. A slowing national market doesn’t mean prices will drop everywhere. Now’s a great time to connect with local real estate agents and start building your network in the area.
- Keep an eye on interest rates. Keep an eye on the Bank of Canada’s decisions and their impact on mortgage rates. The federal funds rate and how lenders set their rates are also key factors to watch.
If you’re planning to sell
- Improve your home’s condition. Homes in excellent condition tend to sell for higher prices. Consult with a real estate agent for suggestions and begin making those improvements before listing.
- Offer a realistic price. Talk to a real estate agent to determine a competitive price based on the current market. Setting the right price is crucial for a successful sale, so be sure to stay realistic.
- Take note of timing. List your property at the right time by considering local market trends.
- Be ready to negotiate. In a balanced market, be prepared to negotiate with buyers. You may need to adjust your expected sales price, so staying flexible is important.
Kickstart your home ownership journey with Superb Mortgages
So, are home prices dropping? The answer for 2025 isn’t straightforward. While the market is cooling off from recent highs, trends differ across regions. In short, there’s no one-size-fits-all “best time” to buy a home. At Superb Mortgages, we’re here to guide you through these shifts and help you make the right move for your situation.
Some areas may see price drops, while others could stay the same or even see small increases. To make smart decisions, it’s important to stay informed about local conditions and consult with experts. Being flexible and well-informed will help you navigate the Canadian real estate market in 2025.
Ready to start your journey toward owning your dream home? Whether you’re just browsing or ready to take the leap, Superb Mortgages is here to support you every step of the way. Let’s make your path to homeownership easy, seamless, and stress-free.