Canadian housing market stalled by tariff fears

In Toronto, Canada’s largest city and financial center, the typical spring surge in real estate activity has been absent, according to industry insiders.

The Greater Toronto Area saw a 23.1% year-on-year drop in sales for March, while new listings surged nearly 29%, according to the Toronto Regional Real Estate Board. This marked the weakest resale month in 27 years.

Jason Mercer, the board’s chief information officer, suggested that economic concerns and an upcoming federal election are prompting many buyers to adopt a wait-and-see stance.

"Homebuyers need to feel their employment situation is solid before committing to monthly mortgage payments over the long term," Mercer said, noting that affordability has improved and prices in the region declined by roughly 3.8% year-over-year in March.

Calgary, the largest city in Alberta’s oil region, is also feeling the strain.

The local real-estate board reported a 19% year-over-year decline in existing home sales, alongside growing supply and a notable increase in the average time homes spent on the market.

On Canada’s West Coast, Metro Vancouver recorded its lowest March home sales since 2019, down 13.4% from the previous year and nearly 37% below the 10-year seasonal average, even as active listings climbed.

"The chills the U.S. trade war has sent through participants in the housing market are getting frostier," said Robert Hogue, assistant chief economist at Royal Bank of Canada told The Wall Street Journal.

Hogue noted that resales have dropped in multiple markets for two consecutive months, with rising inventories putting downward pressure on home prices in several regions.

While Canada avoided new tariffs when U.S. President Donald Trump introduced reciprocal levies on various countries earlier this month, Hogue believes a meaningful recovery is unlikely until trade uncertainties subside.

Trump’s tariffs would cause damage on each of Canada’s economic sectors, even those not dependent on exports to the U.S., according to Tony Stillo, director of Canada Economics at Oxford Economics.

"Tariffs are going to hit the targeted sectors obviously, but they’re big enough that they’re going to cause a broad recession," he told BNN Bloomberg in an interview.

"When you have a broad downturn in the economy, all sectors get hit and housing is not immune."

Stillo added that in recent months, the housing market has taken a downturn. Buyers who are concerned about job security have held off on purchase.

He expected another 5% drop in housing prices across the country, although it would vary depending on the market.

National resale activity in February fell 9.8% month-over-month, potentially exacerbated by severe winter storms in some areas, according to the Canadian Real Estate Association.

This was the steepest decline since May 2022, pushing sales to their lowest point since November 2023 and halting signs of a pickup in prior months.

In a recent analysis, Rishi Sondhi, an economist at Toronto-Dominion Bank, projected a double-digit quarterly drop in Canadian home sales and a mid-single-digit decrease in average home prices for the first quarter of 2025.

This is a sharp departure from a December forecast – before Trump’s inauguration – that anticipated modest growth in sales and prices driven by relaxed federal mortgage rules, lower interest rates, and sustained economic expansion.

The Bank of Canada’s next monetary policy decision is expected to be a cautious stance on rates, weighing the inflationary risks of tariffs against their potential to suppress demand and economic growth. This could lead to a pause after seven consecutive cuts to the policy rate.

The tariff threat has also darkened prospects for new construction. Statistics Canada reported last week that the value of residential building permits issued in February fell 2.9% from January, following a January decline that partially reversed a late-2024 surge in permit activity.