With tariffs hanging over Canada’s economy, the housing market got off to a “slower-than-expected” start in the spring but may recover in the fall, a new report by Royal LePage released on Wednesday said.
The report said the housing market could find “balance” in the fall, which means Canada’s falling home prices could plateau by year’s end.
“Canada’s housing market is shifting toward balance, as easing prices, rising listings and renewed rate cuts improve affordability across most regions,” Royal LePage CEO Phil Soper said in a statement.
“For the first time in years, buyers – especially in previously supply-strapped markets – have real choice and negotiating power. With confidence returning and further rate reductions expected into early 2026, we anticipate noticeably stronger activity by the spring.”
Nationally, the average home price in Canada is expected to be $827,796 by the end of the year, a modest increase of one per cent compared with $819,600 at the same time last year.
Some of the country’s most expensive markets, like Toronto and Vancouver, will see prices decline compared with the end of 2025. In the Greater Toronto Area, the average home is expected to cost around $1.11 million, a drop of three per cent compared with last year, the Royal LePage report said.
Meanwhile, Greater Vancouver will see the average home price around $1.2 million by the end of the year, a two per cent decrease compared with last year.
Quebec City is set for the biggest increase in home prices with a 15 per cent spike, but with the average home costing $460,690 in the city, it is well below the national average, the report added.
While this is a bit of a recovery compared with the spring, building on modest price rises in the summer, experts warn that a full recovery is still not on the horizon.
“We haven’t quite reached that turning point yet where there’s been additional pressure on prices or competition. There’s still a lot of buyers that are holding out,” Royal LePage spokesperson Anne-Elise Cugliari Allegretti said.
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The recent lows in the housing market are a “correction” after the peak of the housing market in 2022, which saw home prices rise to unaffordable levels for many, Allegretti said.
“This has been the first time in several decades where we’ve had this much of a correction, or this prolonged period of improved affordability, especially in the most expensive markets, like Toronto and Vancouver,” she said.
What’s keeping buyers out?
The dream of owning a home remains out of reach for many Canadians, with the latest affordability report by Ratehub.ca showing that housing affordability worsened in seven out of 13 of Canada’s biggest cities.
The report showed that for a Toronto family to afford a home in the current market, they would need to have a household income of $200,160. In 2023, the median household income in Toronto was $134,300, according to the Canada Mortgage and Housing Corporation.
In Vancouver, a household would need an income of $234,700 to afford a home, according to Ratehub. However, the median household income in Vancouver is around $126,000, according to CMHC.
With housing affordability still not at comfortable levels, “there’s really no urgency to buy today,” Allegretti said.
“If something could be even more affordable next month, or if I have even a few more months to save that much more from my down payment, they have a little bit more room to play with,” she said.
Many Canadians are still watching signs of U.S. President Donald Trump’s trade war easing or major policy announcements in Canada, BMO economist Erik Johnson said.
“I think a lot of people are still waiting to see if we’re going to get a couple more interest rate cuts, as we’re expecting the Bank of Canada to deliver through March of next year,” he said.
With the unemployment rate already at 7.1 per cent, Canadians have been worried about losing their jobs in the trade war, Johnson said. This economic uncertainty prevents them from taking the plunge on a big purchase, like a car or a house.
“The big shadow that’s hanging over the entire Canadian economy and much of the North American economy is where all the negotiations are going to go on USMCA,” he said, referring to the Canada-U.S.-Mexico trade agreement, also known as CUSMA in Canada.
In April, Trump exempted goods compliant with the agreement from his tariffs. While that has buffered the effects of the trade war in Canada, some sectors, like steel, aluminum and automobiles, are still facing steep tariffs.
The impact of those tariffs is showing up in the recovery of the housing market, Allegretti said, with communities dependent on trade with the U.S. seeing home values fall.
“In southern Ontario, in the Greater Golden Horseshoe, we’ve seen more depreciation in home prices as well as an increase in the average days on market. What you’ll see is that homes are sitting (unsold on the market) longer and longer,” she said.
Trump’s latest lumber tariffs will also impact the B.C. housing market, Johnson said.
“B.C. certainly is going to feel a little bit more of the weight from any ramping up of lumber tariffs,” he said.
Allegretti said the “right time to buy” depends on the individual household’s needs. While the recovery will be gradual into the fall, buyers should not be surprised to find bidding wars returning as more buyers come out from the sidelines.
“When the market starts to correct, you see a wave all at once of buyer demand return to the market and start to put pressure because sellers aren’t catching up fast enough to supply the properties that are needed for all the demand that comes in,” she said.
However, it is unlikely that a seller would fetch the kind of price for their home that they would have at the peak of the post-pandemic housing rush.
“Homes that are priced properly are definitely going to sell faster. But everyone has to be realistic about the fundamentals of today’s market,” Allegretti said.
That realization is now dawning on some sellers, she added.
“Sellers are slowly but surely coming to grips with the reality of the value of their home. Homes in Toronto are about 12 per cent lower today than in the spring of 2022,” she said.
Johnson said families looking to upgrade to a larger home will also be waiting to see what kind of renewal rate they can get for their current mortgage.
“You have around 1.8 million Canadian mortgages that are all set to renew over the next year,” he said.
Fall housing market moving towards a ‘balance.’ What does it mean for you?
