2025 Canadian Housing Market Predictions: Is a Spring Rebound Ahead?

As anticipation grew for interest rate cuts and affordability challenges increased, many prospective homebuyers chose to wait on the sidelines this year. Consequently, spring home sales were sluggish, and enthusiasm waned. However, following four interest rate cuts by the Bank of Canada this summer and fall—most recently lowering the overnight lending rate to 3.75%—market optimism is gradually returning. Could this set the stage for a busier spring market in 2025?

A Busy, Buoyant Spring Market Is Coming

It has been a few years since the Canadian real estate market experienced a traditional spring season, with sales peaking between March and June and inventory rising to meet demand. That may change in 2025.

“Next year, Canadians can anticipate a lively spring market kicking off as early as March,” says an industry expert. “With interest rates stabilizing and strong pent-up demand among buyers, we’re likely to see a return to a more traditional spring surge in real estate activity.”

According to the Canadian Real Estate Association (CREA), national home sales in May 2024 were the lowest recorded for the month since 2021. On the flip side, national new listings in May 2024 were near the highs of 2021 and 2022, offering buyers more choices and reducing competition.

Buyers entering the spring market in 2025 will likely face increased competition, as many sidelined buyers are expected to return. Meanwhile, heightened buyer activity could encourage more sellers to list their properties, potentially boosting new listings.

Mortgage Renewals Could Prompt a Wave of Downsizing

Housing supply steadily increased throughout 2024, with national months of inventory rising from 3.6 in January to 4 months in October. Fewer buyers entered the market compared to previous years, which helped maintain balanced conditions in many cities. In some of Canada’s most competitive markets, such as Toronto, Vancouver, and Hamilton-Burlington, conditions have even shifted to favor buyers.

In 2025, market conditions will be shaped by two key factors: rising demand from returning buyers and the potential for increased supply from homeowners renewing their mortgages.

“There will be a lot of buyers coming off the sidelines, driving demand higher, while a wave of mortgage renewals is likely to push some homeowners to downsize, adding to supply,” explains the expert. “Although rates have recently come down, they remain significantly above the low levels of 2020 and 2021, when many of these mortgages were originally secured.”

According to the Canada Mortgage and Housing Corporation (CMHC), 1.2 million mortgages will come up for renewal in 2025, with most homeowners facing significantly higher interest rates. Homeowners may find it beneficial to sell their current home and downsize to reduce their monthly mortgage costs.

FOMO May Return as a Motivator for Buyers to Act

During the pandemic years of 2020 and 2021, the Canadian real estate market saw intense competition, driven by buyers eager to take advantage of record-low mortgage rates. Increased competition led to rising home prices.

With mortgage rates expected to decline further next year, some homebuyers may feel motivated to enter the market early to avoid potential price spikes.

“First-time buyers and end-users will drive next year’s sales. With mortgage rates hovering below 4% and expectations that they may continue to fall, buyers could find themselves motivated by concerns of rising prices, potentially sparking a renewed sense of FOMO (fear of missing out),” explains the expert.

A recent survey revealed that 42.3% of respondents said rising home prices were their primary concern regarding home buying, followed by interest rates (25.6%) and economic uncertainty (14.9%). Fortunately, average home prices in British Columbia and Ontario have been mostly flat in 2024, while average condo prices in many markets have experienced year-over-year decreases, possibly offering a window of opportunity for buyers.

Conditions Will Be Tight for Condo Investors

In October 2024, active condo listings in Toronto rose 26% from 2023 and 90% from 2022, according to the Toronto Regional Real Estate Board. Similarly, in Vancouver, active apartment listings increased 29.3% year-over-year and 46% from 2022, according to Greater Vancouver Realtors.

This rise in supply is driven by investors listing properties as high borrowing costs make profits harder to achieve. In 2025, condo market challenges will likely persist for investors.

“Investors will continue to have a lot of supply as multi-residential mortgage renewal rates push many condos and multiplexes underwater,” notes the expert. “At the same time, the challenges of making land investments financially viable continue to discourage new development.”

An Urbanation and CIBC Economics report highlighted that while rents on leases of newly completed condos rose 8% in 2023, average monthly ownership costs rose by 21%. Since 2020, ownership costs have climbed by almost 60%. As a result, investors are pulling back, leaving new condo sales nowhere to go but down. In Q3 2024, Urbanation reported that new condo sales in the Greater Toronto and Hamilton Area fell 81% year-over-year to 567 sales, representing the lowest quarterly total since Q1 1995.

Advice to First-Time Homebuyers: Get Into the Market Any Way You Can

Younger homebuyers are finding it increasingly difficult to buy real estate, especially as income growth lags behind housing costs. In 2011, the homeownership rate for those aged 25 to 39 was 38.9%, but by 2021, it had dropped to 33.8%, the largest decline among any age group, according to Statistics Canada.

While saving up for a dream home may seem out of reach, putting a down payment on a more affordable property type—even one needing some DIY love—could pay off in the long run by building equity and eventually upgrading to a more desirable home.

“For first-time buyers, the most important step is simply getting into the market and owning land. A livable but unpolished home can be a solid investment, as the value of the land will appreciate over a young person’s lifetime,” advises the expert. “Adding a basement apartment or garden suite can generate extra income or further boost the property’s value. Ultimately, it’s about owning land and building equity.”

For example, if you bought a condo in Toronto in 2019 for the benchmark price of $579,000 and sold it in 2024 for the current benchmark price of $789,000, you would have built $210,000 in equity. Similarly, investing in a townhouse can also benefit those able to save for a slightly larger down payment. In 2019, the benchmark price for a townhouse in Toronto was $735,000, and by 2024, it rose 45% to $1,067,000, resulting in over $330,000 in equity.

First-time homebuyers should consider their long-term homeownership goals when planning to buy their first home. Viewing your first home as one step toward your ultimate dream home, rather than a permanent residence, can help you climb the ladder of homeownership.

Ready to start planning for the 2025 real estate market? Contact a local real estate agent today for guidance tailored to your needs.