Will economic peril push homebuyers to the sidelines?
Canada’s housing market appeared to be gearing up for a promising 2025 marked by lower interest rates and improving consumer confidence before the fly in the ointment arrived: the prospect of enormous tariffs on Canadian goods crossing into the US, a bombshell that threatened to wreak havoc on Canada’s economy.
Those measures have been put on ice until the beginning of March, with hopes that a more permanent deal can be struck to take the tariffs off the table entirely. But until then, they continue to loom over the Canadian economy – and they may now be factoring heavily in many homebuyers’ thoughts as they weigh up a potential move this year.
Max Singh (pictured top), a Calgary-based broker with TMG The Mortgage Group, told Canadian Mortgage Professional that while new rule changes, including longer amortization options, had helped fuel mortgage demand at the turn of the year, that tariff talk had cooled enthusiasm among some hopeful buyers.
“It’s rather interesting: this tariff [news] has now effectively changed the conversation. It’s something that was incredibly unplanned and has effectively sidelined some buyers until there’s further clarity,” he said.
“We were all waiting with bated breath for Tuesday [February 4, when the tariffs were scheduled to come into effect]. I had a lineup of clients over the weekend that had submitted offers and then effectively on Monday they put pauses both on entering into new construction agreements and resale agreements.”
Buyers taking wait-and-see approach as tariff threat remains
Even Canadian prime minister Justin Trudeau’s announcement on Monday evening that he and US president Trump had reached an agreement to suspend the imposition of the tariffs for a month did little to calm those buyers, Singh said, as they await further news on whether the tariffs will still come into force in March.
Canada’s labour market outperformed expectations in January, adding 76,000 jobs as the unemployment rate dipped to 6.6%. CIBC’s Andrew Grantham sees room for rate cuts, citing ongoing labour market slack. https://t.co/nfS2tVMUcl
— Canadian Mortgage Professional Magazine (@CMPmagazine) February 7, 2025
“The can was kicked 30 days down the road, and they’re in a rather interesting holding pattern,” he said. “Clients are calling for clarity and recommendations and it’s difficult for us to not just provide them with a solution – which exists – but clarity on what’s going to transpire going forward. So that seems to be the only stifling piece that’s come about in the last while.”
Canadian homebuying unlikely to plunge despite economic doubts
That’s not to say homebuying interest has fallen off a cliff. While January is typically a quieter month thanks to weather and a post-holiday lull, Singh described a Calgary market that’s remained steady, in part because of the better affordability outlook in the city compared with Toronto and Vancouver and a sudden influx of more inventory.
Those who are still determined to buy now are also benefiting from more balanced conditions, he added, and less likelihood of a bidding war to secure the property they want.
The outlook on interest rates is also good, with fixed rates sliding significantly last week and further cuts by the Bank of Canada seemingly on the horizon.
“It does look like a declining interest rate environment going forward in terms of the Bank of Canada’s message and sentiment and on the bond market too,” Singh said. “We’ve seen the five-year bond rate drop significantly in the last few days… that’s certainly a positive indicator for fixed rates further declining.
“Lower interest rates result in us being able to preapprove slightly higher than the previous interest rate, assuming it’s higher, which gives consumers greater purchasing power and which is needed.”
Canada’s national housing agency also sounded an optimistic note on the future of the housing market despite the threat of tariffs last week, suggesting in its latest market outlook that even severe US tariffs would be unlikely to crater homebuying activity.
In its medium-term forecast for tariffs, Canada Mortgage and Housing Corporation (CMHC) said a moderate trade war wouldn’t entirely put hopeful buyers off entering the market. “Despite the economic headwinds… we expect housing market activity in Canada to improve,” its economists wrote last week.
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