Canadian Housing Market Set for a Booming 2025: Is Your Dream Home Within Reach?

As we move towards 2025, Canadian real estate experts are optimistic about a potential boom in the housing market. After a sluggish 2023, many were hopeful that a resurgence would begin by spring 2024. However, the anticipated uptick took longer to materialize, primarily due to the Bank of Canada’s delayed interest rate cuts, which only began in June. Even with buyers starting to return to the market this fall, initial cuts did not immediately engage all potential homebuyers.

As we look forward to 2025, economists believe that stronger market activity is expected. With significantly lower borrowing costs and more advantageous purchasing conditions, even amidst challenging affordability issues, a shift is on the horizon. The Canadian Real Estate Association (CREA) reported a remarkable 26% year-over-year increase in home sales in November, marking the second consecutive month of substantial gains. Cumulative home sales for the first 11 months of 2024 were up 6.9% compared to the previous year.

Christopher Alexander, president of Re/Max Canada, emphasized the return of first-time homebuyers, who are crucial to the market’s recovery. He forecasts a more vigorous year for both market activity and consumer confidence, especially with continued anticipated interest rate reductions.

Recently, the Bank of Canada has lowered its policy rate to 3.25%, down from a previous high of 5%. Experts predict that this will entice many buyers back into the field. In fact, the Re/Max housing market outlook predicts sales growth in 33 of Canada’s 37 regions, with anticipated price increases of up to 5% in the national average.

However, patience has been a double-edged sword for potential buyers. People have held off, anticipating even lower rates, which can lead to price competition as the market warms up. Mike Heddle, a broker in Hamilton, Ontario, believes that as buyer confidence resurfaces, the market may transition back toward a balanced-to-seller’s environment.

While the demand is expected to revitalize transactions in the coming months, experts like TD economist Rishi Sondhi caution that this surge may be short-lived, likely easing within the first half of the year. The national average home price currently sits at approximately $694,411.

Supporting this newfound activity are recent federal mortgage rule changes, effective December 15. These revisions include extending the maximum mortgage amortization for first-time buyers from 25 to 30 years and raising the insured mortgage cap from $1 million to $1.5 million. As a result, TD forecasts expect a 16% increase in home sales and an 8% rise in average home prices throughout 2025.

Moreover, the national banking regulator's move to eliminate the stress test for uninsured mortgages further bolsters buyer confidence. With these changes, experts predict that the spring market will heat up as affordability improves.

Nevertheless, outside factors like labor market fluctuations and ongoing political uncertainty—both within Canada and in the U.S.—might still impact market conditions. Some experts remain hesitant to compare the current climate to the skyrocketing activity of 2021 and early 2022, given that affordability and qualification hurdles persist.

Re/Max's Alexander warns potential buyers against waiting too long for the “perfect” moment to enter the market, as prices might continue to rise. He advises aspiring homeowners to buy within their financial means rather than trying to time the market.

All signs point toward an exciting and vibrant Canadian housing market in 2025. However, for many, the dream of homeownership may still hinge on navigating the intricacies of financing and market fluctuations. Your perfect home may be just around the corner—are you ready to make your move?