Canada’s housing markets are facing significant challenges as trade tensions and economic uncertainty weigh heavily on buyer confidence and market dynamics. The latest report from RBC Economics highlights a steep decline in resale activity and softening home prices across many major markets, with southern Ontario and British Columbia experiencing the most pronounced downturns.
April 2025 marked a troubling month for the Canadian real estate landscape as year-over-year resale activity tumbled in key regions such as the Fraser Valley, Greater Vancouver, and Toronto. According to Robert Hogue, an analyst at RBC, sales in southern Ontario have reached near-cycle lows, with Toronto recording its weakest April in three decades, excluding the pandemic shutdown of 2020. This trend indicates a growing imbalance in the market, where sellers are not matching the pullback from buyers, resulting in rising inventories and declining prices.
The composite MLS Home Price Index (HPI) fell again in April in several key regions, including Toronto, Hamilton, Kitchener-Waterloo, Vancouver, and the Fraser Valley. In Calgary, a market that had previously shown resilience, prices dropped for the first time in five years, with a year-over-year decline of 1.4%. Hogue noted that the bargaining power has shifted in favor of buyers across these markets, suggesting that confidence remains fragile and the outlook uncertain until trade tensions ease.
In Toronto, the housing market is experiencing a "material correction in property values." The composite HPI in the city dropped 0.7% from March and is down 4.4% since December 2024, bringing the average home price to approximately $1.07 million. This decline is compounded by a significant influx of new listings that have outpaced buyer demand, tipping the scales heavily in favor of buyers.
Meanwhile, the Vancouver market, despite being at a two-year low for home resales, shows signs of stability. The composite HPI has declined for four consecutive months, down 1.8% from April 2024. Hogue predicts that buyers will continue to leverage their power to negotiate lower prices in the months ahead.
Montreal’s housing market, on the other hand, has shown resilience, with home resales stabilizing and prices climbing modestly—up 2.5% month-over-month for single-family homes and 1.1% for condos. However, experts warn that rising listings could shift the balance towards buyers, leading to a slowdown in price growth.
Calgary, which had been a strong performer, is now also showing signs of strain. The city experienced its first year-over-year HPI decline since 2020, and April marked a five-year low in resales. Although new construction has kept supply strong, buyer uncertainty is hampering price growth. RBC anticipates further mild declines as the market continues to rebalance.
Amid these developments, the Bank of Canada (BoC) has expressed concerns about potential household strain due to high debt levels and global trade volatility. Approximately 60% of outstanding mortgages are set to renew in 2025 or 2026, and many borrowers, especially those who locked in ultra-low fixed rates during the pandemic, will face higher payments. While the BoC has noted that most mortgage holders have shown resilience to rising interest rates, the transition to higher payments may not be painless.
As the report indicates, many households will likely need to cut back on spending or draw from savings to manage rising non-mortgage debt. The BoC emphasizes the need for strong capital buffers and liquidity to help institutions withstand potential financial shocks. Despite the challenges, Canada’s banking sector remains robust, with large banks benefiting from strong capital ratios and stable funding access.
However, medium-sized banks, which often cater to higher-risk borrowers, are beginning to show signs of stress, particularly in their mortgage portfolios. While delinquencies at larger banks remain low by historical standards, recent increases suggest that some borrowers are starting to feel the strain of rising living costs and past rate hikes.
In the context of the housing market, the ongoing trade war is seen as a significant headwind, contributing to buyer hesitancy. The uncertainty surrounding U.S. trade policies is causing potential buyers to remain on the sidelines, further complicating the recovery of the housing market. The stress tests conducted by the BoC and the IMF indicate that even in a scenario where house prices fall by 26%, large banks would still remain solvent, but substantial credit losses could lead to tightened lending standards, further straining the housing market.
In Metro Vancouver, the situation is similarly bleak. Real estate reports indicate a dip in April sales compared to previous years, coupled with a rise in the number of homes for sale. The number of available homes in the region is at its highest since 2018, with about 16,000 pre-sale and new homes along with 24,000 resale homes on the market. This accumulation of inventory, combined with a reluctance from buyers to commit, suggests that prices may drop slightly in the near future.
Ryan Berlin, head economist at realty company Rennie, noted that while sales typically see a significant increase coming out of winter, this year’s April sales were only 34% higher than January, a stark contrast to the average 79% increase seen in previous years. The ongoing trade war is cited as a major factor behind buyer hesitancy, alongside the uncertainty leading up to the recent federal election.
As the market continues to grapple with these challenges, experts recommend that potential buyers consider making lower-than-normal offers, suggesting bids that are five, ten, or even fifteen percent below asking prices. While prices have stagnated for now, there may be opportunities for buyers to negotiate better deals as the market adjusts to new realities.
Looking ahead, the need for political and economic stability is paramount for a revival in home sales. Until there is clarity around Canada’s economic strategy and its trade relationship with the U.S., the current buyer hesitancy is likely to persist, keeping the housing market in a state of flux.
