After years of turbulence marked by skyrocketing prices, policy interventions, and economic uncertainty, Canada’s housing market is at a crossroads. As 2025 progresses, experts and homeowners alike are asking the same question: are we entering a phase of recovery—or heading for another downturn?
Market Stabilization or Just a Pause?
According to recent data from the Canadian Real Estate Association (CREA), national average home prices have edged up slightly in the first quarter of 2025, following a sharp drop in late 2023 and early 2024. Major urban markets like Toronto and Vancouver show signs of stabilization, but rural and smaller city areas remain unpredictable.
“It’s too early to call it a recovery,” says Elise Tran, a housing economist at the University of British Columbia. “We’re seeing some positive signs, but affordability remains a massive issue, and buyer confidence is still fragile.”
Interest Rates: Relief or Reversal?
The Bank of Canada’s decision to hold interest rates steady at 4.25% after a series of aggressive hikes in 2023 has given some relief to buyers. Mortgage approvals have increased marginally, and refinancing activity is also picking up.
However, analysts warn that if inflation persists, rate hikes could return, putting renewed pressure on both first-time buyers and current homeowners with variable-rate mortgages.
New Construction and Supply Challenges
While housing starts have increased by 6% nationwide, supply chain disruptions and rising material costs continue to delay many projects. Efforts by the federal government to accelerate affordable housing builds under the National Housing Strategy are underway but face bureaucratic hurdles at the provincial and municipal levels.
“There’s no quick fix. We need zoning reform, faster permits, and stronger incentives for developers to build middle-income units,”
Regional Differences Shape the Narrative
In cities like Calgary and Halifax, moderate price growth and job stability have fostered cautious optimism. Meanwhile, markets in Quebec and British Columbia remain sensitive to investor speculation and regulatory shifts, such as the foreign buyers ban and vacant property taxes.
Younger Buyers Still Struggling
A recent RBC report indicates that Millennials and Gen Z continue to be priced out of the market, especially in major metros. With rent also reaching historic highs, many young Canadians are forced to delay homeownership or relocate entirely.
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What to Expect in the Second Half of 2025
The trajectory of Canada’s housing market will hinge on several factors: interest rates, inflation control, and the success of housing policy implementation. If borrowing costs remain steady and construction continues to ramp up, 2025 could mark the start of a cautious recovery.
But for now, both buyers and sellers remain in a holding pattern—watching and waiting for signs of stability in a market that has proven anything but predictable.