Stability to return to housing market?

Author of the article:

Linda White  •  Special to Postmedia Network

Published Jan 10, 2025  •  4 minute read

Buyers are expected to return to the real estate market this year.   ROYAL LEPAGE

But prices expected to rise across country

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Buoyed by declining interest rates and new lending rules, buyers will return to the real estate market this year, Royal LePage’s Market Survey Forecast predicts.

“After several years of unusual volatility in the real estate market, key indicators point to a return to stability in 2025,” says Royal LePage president and chief executive officer Phil Soper.

The backlog of “willing and able buyers” continues to grow and changes to mortgage lending rules will boost Canadians’ borrowing power, he says.

The company predicts the average price of a home in Canada will rise by six per cent year-over-year to $856,692 in the fourth quarter of 2025, falling in line with long-term trends. The median price of a single-family detached property and condominium is projected to increase seven per cent and 3.5 per cent to $900,833 and $605,993, respectively.

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Royal LePage expects home prices will rise in all major markets across the country. Quebec City leads the charge at 11 per cent, followed by Edmonton and Regina at nine per cent. The aggregate price of a home in the Greater Montreal Area is expected to rise 6.5 per cent, outpacing the country’s two priciest markets: the Greater Toronto Area and Greater Vancouver, which are expected to see more moderate gains of five per cent and four per cent, respectively.

But Soper warns new leadership south of the border and a federal election on the horizon here at home, together with evolving trade relations, immigration policies and global conflict, could potentially cause “ripple effects” in the Canadian housing market.

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Re/Max Canada, meanwhile, is also expecting a more active market this year and predicts the national average residential price will likely increase by five per cent. “While affordability challenges persist, the sequential interest rate cuts and changes to the mortgage stress test are a much-needed reprieve for those looking to get into the market,” Re/Max Canada president Christopher Alexander says.

“The current environment is more encouraging than it has been in the past few years, especially for first-time homebuyers. However, a boost in sales, coupled with limited inventory, almost always leads to rising prices, which is the trend we’re expecting to see materialize in virtually all Canadian housing markets.”

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Ontario buyers can expect sale price increases across the province. Due to low supply and lack of affordable housing, Toronto expects a slight price increase of 0.1 per cent. Prices are expected to increase by two per cent in Niagara; 2.3 per cent in Hamilton; 2.5 per cent in Ottawa and Kenora: three per cent in Sault Ste. Marie, Thunder Bay, Muskoka and Haliburton; four per cent in Kawartha Lakes; 4.5 per cent in London and Burlington; five per cent in Peterborough, Sudbury, North Bay, Durham, Kingston and York Region; six per cent in Kitchener-Waterloo, Mississauga and Brampton; and 10 per cent in Simcoe County.

Despite ongoing affordability and inventory challenges across multiple markets, buyer confidence is returning as first-time homebuyers and sidelined buyers in Ontario feel the impact of lower mortgage rates and the new 30-year amortizations, Re/Max reports.

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As a result, most regions expect first-time homebuyers will drive market activity in 2025, except in larger regions in southern Ontario like Toronto, Windsor, York Region and Simcoe County. Because of higher home prices for entry-level properties, move-up buyers are expected to drive market activity in those regions.

Mortgage predictions

With the Bank of Canada poised to decrease its trend setting rate by another 75 to 50 basis points over the next six months, the variable-rate mortgage is set to make a comeback this year.

“That would bring the overnight lending rate to a range between 2.5 to 2.75 per cent and the best variable mortgage rates will in turn fall to the mid to upper three per cent range,” says Ratehub.ca mortgage expert Penelope Graham.

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“Fixed mortgage rates, meanwhile, appear to be nearing their floor as bond investors hold firm in the face of economic uncertainty, including a potential trade war in the first half of the year.”

Graham also predicts borrowers will lock in for shorter terms. “As five-year rates appear to be stagnating, borrowers are loath to lock in for the long term. Options such as two- and three-year fixed terms offer the best of both worlds, offering shelter from short-term volatility and the flexibility to make a change to their mortgage term sooner, without taking on the risks associated with a variable-rate mortgage,” she says.

Also, watch for banks to “do battle” on rate pricing. “With 1.2 billion fixed-rate mortgage holders coming up for renewal this year, lenders will be keen to retain their book of business or snap up borrowers willing to make a switch,” Graham says.

“As the stress test requirement has been relaxed for many renewing borrowers it’ll be easier than ever to change to a new bank at renewal time if they’re offering a better deal. As mortgages are considered ‘anchor’ products, it will be worth it for lenders to get aggressive with both their purchase and renewal rate pricing.

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