Canadian Real Estate Market to Rebound in 2025
By Condos HQ - Feb 05,2025
The Canadian real estate market has always been the backbone of economic success, and no less so in 2025-a year promising opportunity and growth.
Though 2024 came with its challenges, such as the increase in interest rates by the Federal Reserve to stem the demand for housing, this year gets off on a very positive note. The early signs in January have shown a market on the rebound, helped by forward-thinking policies, innovative programs, and a more balanced landscape. It is now an exciting time for homebuyers, investors, and industry players alike as the year gets going with its building blocks already set toward success.
Accordingly, investor sentiment is on the mend with expectations of more activity in several residential and commercial real estate market sectors.
As the market recovers, so does the investors’ confidence returns.
It is seen that after two slow years of investment activity, Reid Taylor, Colliers Canada’s senior vice-president, capital markets believes a new cycle will start to ramp up next year. “The worst is over,” said Taylor, suggesting a slow rebound with increased interest from abroad setting up 2025 as another strong year across Canada, notably in multi-residential, retail, and industrials.
Residential real estate also presents some strong growth, particularly as more first-time homebuyers return to the market. Through the end of 2025, lower borrowing costs are expected to push up home prices about 6%, driven by increased demand. Growth will be more modest for condos, with single-family homes up roughly 7%.
Will New Policies Make Homeownership More Affordable?.
From renters to homebuyers, Canadians feel the pinch on housing. But is it possible to go back to an era of affordable houses? Housing trends have dramatically shifted in recent decades, but perhaps none quite so concerning as that of affordability. Owning a home remains a big aspiration among people, and with the right measures in place, the path to affordability can become a reality once again. As 2025 unfolds, reports out at the end of January showed housing affordability is now at its lowest since 1996. In other words, compared to incomes, the cost of owning a home is the most favorable in nearly three decades-most likely because home prices have fallen, mortgage rates have fallen .While market conditions change, it is potentially the best time for would-be buyers..
A few programs that helped buyers save for the down payment by offering money or tax breaks.
It includes enhancements to the First-Time Home Buyer Incentive, making down payments easier because of its shared mortgage with the government.
It was called a shared equity mortgage with the Government of Canada. It would have provided either 5% or 10% of the purchase price to go toward the down payment of the home. The shared equity component of the Incentive means that the government shares in both upside and downside of the property value up to maximum gain or loss of 8% per annum not compounded on the Incentive amount from date of advance to time of repayment.
In other words, by getting the Incentive, the borrower would not need to save as much of a down payment to afford their mortgage payments.
The home buyer repays the incentive based on the market value of the home at the time of repayment equal to the percentage (for example 5% or 10%) of the original home value based to determine the Incentive. Up to a maximum repayment amount equal to:
- If the value of the home has increased, the Incentive plus up to 8% per annum (non-compounding) on the amount of the Incentive from the date of advance to the time of repayment; or
- If the value of the home has decreased, the Incentive minus up to 8% per annum (non-compounding) on the amount of the Incentive from the date of advance to the time of repayment.
The Incentive must be repaid by the homebuyer after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full at any time before then, without a pre-payment penalty.
How it helps: In this way, young people and families can buy a home without excessive debt.
Bridging the Gap: Estimating Canada’s Housing Needs to Achieve Affordability by 2030
Responsiveness of supply has been a big headache for the housing market in Canada. Despite the rapid growth of demand in major cities, the new supply of housing hasn’t kept pace, forcing affordable concerts across the country. The housing sector is at an important juncture given evolving market dynamics, policy interventions, and economic conditions in 2025.
In the recent past, the trends within the industry have been on an upward trajectory and are projected to reach 19 million units by 2030. These include government incentives for new developments, zoning reforms to quicken construction, and reduced borrowing costs.
Conclusion: By 2025, the Canadian real estate market may send strong recovery signals stirred by restored confidence among investors, favorable policies for first-time homebuyers, and sustained efforts at augmenting supply. While affordability issues remain, proactive steps being taken toward their containment and generally more balance in the market are good omens for better times ahead in owning homes for more Canadians. And lower borrowing costs, increased development, and a resilient economy all combine to provide just the right ingredients for a year of opportunity coupled with sustainable growth in the housing sector.
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