Canada’s housing market is heading into 2025 with a mix of optimism and uncertainty. After a volatile 2024 that saw fluctuating interest rates, rising inventory, and shifting buyer sentiment, the big question now is whether home prices will continue their upward trajectory or level off as economic conditions evolve.
The Numbers: Where the Market Stands Now
As of January 2025, the national average home price sits at $695,000, reflecting a 4.2% year-over-year increase. While this growth remains moderate compared to the double-digit price surges of 2021 and early 2022, it signals that Canada’s real estate market is still experiencing upward momentum despite affordability challenges.
The number of home resales fell by 19% in December 2024, suggesting that higher prices and economic conditions are keeping some buyers on the sidelines. However, new listings rose by 12% year-over-year, increasing supply and giving buyers more options in major markets.
Interest Rates: The Biggest Wildcard for 2025
The Bank of Canada’s interest rate policy remains the most critical factor shaping the housing market’s trajectory. The central bank has already started easing rates, with the benchmark rate dropping to 4.5% in late 2024, down from its peak of 5.25% earlier in the year. Experts predict further reductions throughout 2025, with some forecasting rates as low as 3.75% by year-end.
Lower interest rates translate to improved mortgage affordability, which could encourage more buyers to enter the market. However, if inflationary pressures return, the Bank of Canada may slow its rate-cutting cycle, potentially tempering market activity.
Regional Market Breakdown
Canada’s real estate market is highly regionalized, with significant differences between provinces and cities. Here’s how some of the country’s largest markets are expected to perform in 2025:
Toronto: The GTA market is showing early signs of stabilization, with home prices rising 3.8% year-over-year, bringing the average home price to $1.13 million. Detached home sales remain strong, but condo prices are experiencing downward pressure due to increased supply. Buyers are taking a more measured approach, with many waiting to see how interest rates evolve before making a move.
Vancouver: Prices in Metro Vancouver are holding steady, with an annual increase of 2.9%, bringing the average home price to $1.23 million. While demand remains high, affordability continues to be a major barrier, particularly for first-time buyers. The market is expected to see moderate price growth, driven by strong immigration and limited supply.
Calgary: After a red-hot market in 2023 and early 2024, Calgary’s housing sector is starting to cool. The city saw a 10% decline in home sales in Q4 2024, with prices stabilizing around $540,000. The slowdown is largely attributed to rising inventory and shifting economic conditions, but Alberta’s lower cost of living and strong job market are expected to keep demand steady.
Montreal: Unlike other major cities, Montreal is seeing sustained price growth, with home values rising 5.6% year-over-year. The average home now costs $580,000, and demand remains strong across all property types. With a balanced market and fewer affordability concerns compared to Toronto and Vancouver, Montreal is expected to continue its upward trajectory.
Buyer and Seller Behavior in 2025
Buyers are expected to take a more patient approach in 2025, given that more inventory is coming onto the market and interest rates are likely to decline further. This shift means fewer bidding wars, longer decision-making periods, and more room for negotiation.
For sellers, competitive pricing will be key. Overpriced homes are likely to sit on the market longer, especially in cities where inventory is rising. Sellers in high-demand areas, such as Vancouver and Toronto’s core, will still benefit from strong demand, but those in suburban or less competitive markets may need to adjust their expectations.
Investor Trends: Condos vs. Multi-Unit Properties
Real estate investors are adapting to the changing landscape by shifting their focus from condos to multi-unit residential properties. With rental demand surging and the average rent for a one-bedroom apartment reaching $2,750 nationally, investors are looking at duplexes, triplexes, and small apartment buildings as more attractive long-term assets.
Condo prices, particularly in cities like Toronto and Vancouver, remain soft due to increased supply. Many investors are waiting to see how the condo market stabilizes before making further investments. However, demand for rental condos remains high, meaning well-located units near transit and employment hubs continue to generate strong rental yields.
Government Policy and Housing Supply
Government intervention is expected to play a significant role in shaping the 2025 housing market. The federal government has announced plans to accelerate the construction of affordable housing, with incentives aimed at increasing supply in major urban centers. Provincial and municipal policies, such as zoning changes to allow more multi-family developments, could also impact the market by adding much-needed inventory.
Despite these efforts, supply shortages remain a major concern. Canada’s housing construction has not kept pace with population growth, and while new policies may help in the long term, they are unlikely to fully address the current supply-demand imbalance in 2025.
What to Expect for the Rest of 2025
Looking ahead, the Canadian housing market is expected to see moderate price growth, with appreciation ranging between 3-5% nationwide. While lower interest rates will provide relief, affordability challenges will persist, particularly in high-cost cities.
Buyers should watch for further interest rate cuts in the coming months, as these could improve purchasing power and create more favorable conditions. Sellers should focus on pricing competitively and ensuring their properties stand out in a market where buyers have more options. Investors will need to weigh the pros and cons of condos versus multi-unit properties, with a strong rental market making the latter an increasingly attractive choice.
Canada’s Real Estate Market in 2025: A Year of Stability and Adjustment
After years of volatility, Canada’s housing market is entering a period of relative stability, where price growth is expected to continue at a more moderate pace. With interest rates easing, inventory increasing, and buyer behavior shifting, 2025 is shaping up to be a year of adjustment rather than rapid expansion.
For those navigating the market—whether buying, selling, or investing—staying informed and adapting to the latest trends will be key to making the most of the opportunities ahead.
