The Canadian housing market is poised for a powerful comeback in 2025, driven by a confluence of factors that set the stage for significant growth in single-family detached homes. After a 1.75% decline in interest rates in 2024—slightly below my earlier prediction of 2%—the groundwork has been laid for a housing boom. Here’s why I predict a 10% increase in home prices year-over-year and what you need to know to prepare.
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The Return of Single-Family Homes
While condominiums face lingering challenges, single-family detached homes are expected to lead the charge in 2025. These homes cater to growing demand and align with cultural expectations of homeownership in Canada. The following five factors are key drivers of this anticipated resurgence.
1. Delayed Purchases Have Created Pent-Up Demand
Over the past two and a half years, residential real estate sales activity fell to approximately 450,000 units annually, despite robust population growth. This contrasts with the COVID-19 real estate boom when annual sales spiked to 600,000–750,000 units.
Many potential buyers have been waiting for the right moment as they save for down payments or wait for mortgage rates to stabilize. With conditions improving, this pent-up demand is expected to unleash a surge in buying activity.
2. Higher Price Cap on Insured Mortgages
Starting December 15, 2024, the price cap for insured mortgages has increased from $1 million to $1.5 million. This change allows more buyers, especially in high-cost markets like Toronto and Vancouver, to qualify for insured mortgages with as little as 5% down.
Insured mortgages also come with lower interest rates—currently about 4.15% for a five-year fixed-rate mortgage, compared to 4.50% for uninsured loans. This change significantly reduces the financial barrier for first-time homebuyers and those seeking entry-level homes.
3. Mortgage Rates Are Near Their Bottom
After a year of falling interest rates, potential buyers who were hesitant to act are now more motivated. While variable rates may see slight further declines in 2025, the risk of waiting too long outweighs the potential benefits.
Mortgage rates for insured loans are already favorable, and the combination of lower rates and increased insurability will likely push many prospective buyers into action.
4. House Price Declines Have Stabilized
National home prices have plateaued after a dramatic rise during the pandemic and a subsequent correction. From a peak of $835,000 in February 2022, the average price dropped to $719,000 in December 2022.
As of November 2024, the national average sits at $723,000. With prices no longer declining, waiting for further drops is a poor strategy. History shows that housing markets can heat up quickly once price stability is achieved, and we’re at that turning point now.
5. High Immigration Rates Are Sustaining Demand
Canada’s immigration targets remain robust, with 500,000 newcomers in 2024 and 395,000 planned for 2025. These high levels of immigration, coupled with a growing number of non-permanent residents—now over three million—ensure strong demand for housing.
While some newcomers may rent initially, many will seek to buy homes as they establish themselves financially. This trend will continue to drive demand for single-family detached homes, particularly in suburban and urban markets.
What Does This Mean for Buyers and Sellers?
For Buyers
If you’ve been waiting to buy a home, now is the time to act. With mortgage rates nearing their bottom and prices expected to rise by 10% in 2025, current opportunities will likely seem like bargains a year from now.
For Sellers
If you’re considering selling, patience could pay off. While listing now isn’t a bad idea, holding out for higher offers as the market heats up could yield better results.
Ontario Real Estate in 2025: Where Home Prices Are Set to Soar
Toronto Home Prices Poised for a 5% Surge in 2025, Royal LePage Forecasts
Canada’s Housing Challenge: The Best and Worst Cities for First-Time Homebuyers
8 Canadian Cities Where You Can Buy Luxury Homes for $100K or Less
The Bottom Line: A Bright Future for Canadian Real Estate
The Canadian obsession with real estate is set to reignite in 2025, with single-family detached homes leading the charge. Thanks to falling mortgage rates, higher price caps, and strong immigration, home prices are expected to climb by 10% year-over-year.
If you’re in the market, it’s time to make your move. The stars are aligning for a housing resurgence, and 2025 may go down as the year the market regained its momentum.
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