There are dozens upon dozens of municipal and provincial elections in a typical year in Canada, and with a federal election seemingly on the horizon for the new year, there are many issues that are of great importance to people from all walks of life. With various federal housing crises ongoing, many politicians and lawmakers took 2024 to institute changes to policies like immigration to combat rising interest rates and, hopefully, spur more interest in the homeowner’s market.
At first, the current state of the Canadian real estate sector may not seem immediately troubling. According to national statistics gathered by the CREA (Canadian Real Estate Association), Canadian home sales activity increased 7.7 percent month-over-month as of October, the highest since April 2022. Home sales in the Greater Toronto Area (GTA) and the Lower Mainland area of British Columbia saw the greatest increases; however, this is in conjunction with both the number of newly listed properties decreasing by 3.5 percent and the actual national average sale price increasing year-over-year by 6 percent.
When one delves a bit deeper, there are some aspects that are not as positive. Margaret Craig, a real estate advisor for international firm Engel & Volkers, says that, while more expensive markets like Vancouver or the GTA are transitioning to buyers’ markets as of 2024, more affordable markets like Halifax, Nova Scotia or Regina, Saskatchewan are still sellers’ markets. “Higher home prices in the former areas continue to price many Canadians out of the market,” Craig says, with affordability being an even greater concern for younger Canadians who face increased barriers to home ownership due to rising property prices. As a result, many young Canadians are deciding to delay purchasing a home or are choosing to rent instead.
In late 2024, two announcements were made that promise to impact prospective homeowners, as well as the country at large. In October, an initiative called the 2025-2027 Immigration Levels Plan was introduced by the Honourable Marc Miller, Canada’s Minister of Immigration, Refugees and Citizenship. In a press release, the plan was described as one that will pause Canadian population growth on a short-term basis by introducing controlled targets for temporary residents and permanent residents alike. This is a response to the country’s intentional influx of workers from outside Canada, who were sought out to help businesses recover from the economic impact of the COVID-19 pandemic.
Some four years after the height of pandemic lockdown measures, the Canadian government is looking to institute the plan to create a marginal population decline of 0.2 percent in the coming two years, a difference of more than 100,000 permanent residents and over 400,000 temporary residents. This temporary reduction is being made with the intention of eventually returning national immigration to a steady incline, with further goals to transition temporary residents into permanent ones. In a statement, Miller says that, “While it’s clear our economy needs newcomers, we see the pressures facing our country, and we must adapt our policies accordingly.”
Craig says that immigration has been important in offsetting Canda’s aging population while simultaneously being the most significant factor in the Canadian housing crisis. As Canada welcomes three times more immigrants per capita than the United States, “the massive scale of in-migration makes it extremely difficult for housing supply to keep up.” Therefore, the federal government’s plan to slow down immigration may help to reverse this problem without creating new difficulties.
On December 11, 2024, the Bank of Canada issued a press release announcing that it had reduced its target for the overnight key interest rate to 3.25 percent, a basis point cut of 50. In the third quarter of the year, BoC says that the Canadian economy grew by 1 percent, which was below its projections and came in front of projected weakness in the fourth quarter. “Third-quarter GDP growth was pulled down by business investment, inventories and exports,” the press release says. However, consumer spending and housing activity both picked up (data supported by the CREA), which suggests that lower interest rates are beginning to boost household spending.
Several factors are cited by the Bank of Canada as being influential to its December decision. One is that the federal unemployment rate rose to 6.8 percent as of November, as employment grew slower than the actual jobs available. Also, reduced immigration levels through initiatives like the Immigration Levels Plan may cause GDP growth in 2025 to be below the Bank’s forecast. “The effects on inflation will likely be more muted, given that lower immigration dampens both supply and demand,” the Bank of Canada says. Temporary suspension of GST and changes to mortgage rules will likely affect demand and inflation further as well. It also says that the possibility of the incoming Trump presidential administration in the United States imposing new tariffs on Canadian exports will further cloud the economic outlook.
Accounting firm PwC (PricewaterhouseCoopers) Canada reports that the housing industry’s future is decidedly mixed, with a litany of factors contributing to the strength or weakness of a particular area’s real estate outlook. The report goes on to say that when it comes to the condo market, “While some interviewees noted Canada’s rapid population growth will support an eventual recovery for the condo sector in subsequent years, there’s added uncertainty about the outlook for consumer demand.” This is especially because of initiatives like the 2025-2027 Immigration Levels Plan that are looking to address immigration.
The report says that these current trends in real estate reflect a larger shift in the market because of how long national interest rates have been high. Real estate is currently seen by many potential investors as not worth the risk or investment, leading to other avenues being preferred over it. Other factors and trends influencing current attitudes toward Canadian real estate include housing affordability, demographics, supply and demand, environmental sustainability (especially as it relates to natural disasters and insurance), and even the rise of technology like generative AI. This has also led to investors in real estate branching out to more niche opportunities, such as data centres and student housing, to provide greater yield on investment.
New mortgage rules announced by the Canadian government are targeted toward improving affordability for first-time home buyers and providing relief to current homeowners. The changes include insured mortgages for up to $1.5 million, dropping the minimum down payment to $75,000 down from $200,000 on homes priced at $1,000,000, and the ability for lenders to offer 30-year amortizations on insured mortgages for first-time homebuyers purchasing new builds. Craig says that anyone with a variable mortgage would see relief because of the recent rate reduction, but fixed rates were stable as they are primarily tied to bond yields, which are performing well.
While making changes to immigration is a strategy that Canadian officials hope will encourage greater spending in the real estate sector, time will tell whether this plan will bear fruit in the way that the government foresees. The Bank of Canada’s announcement in late January 2025 will surely set the tone for what will likely be a critical year for all involved and for those watching intently from outside the homeowner’s perspective.
