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The trade war is taking an increasing toll on Canada’s housing markets as potential economic fallout weighs heavily on the minds of prospective homebuyers. Southern Ontario and parts of British Columbia—the country’s least affordable areas—are seeing sharper pullbacks in activity and weakening home prices as a result.
Local real estate boards reported home resales fell significantly in April from a year ago in most markets led by the Fraser Valley, Vancouver and Toronto. Sales transactions were at, or close to, cycle lows in southern Ontario.
The MLS Home Price Index fell again in several markets in April including the Toronto region, Hamilton, Kitchener-Waterloo, Cambridge, Vancouver and Fraser Valley—extending months-long negative streaks for the most part. The Calgary index recorded its first year-over-year decline in five years.
Property values are coming under growing pressure amid rising inventories and soft demand. Bargaining power has shifted in the buyer’s favour in Vancouver, Fraser Valley, Toronto and other southern Ontario markets.
Prairie markets such as Edmonton, Saskatoon, Regina, and some in Quebec including Quebec City and the Atlantic region like St. John’s seem to be holding up at this point. But, they aren’t immune to trade-induced anxiety.
The U.S. sparing Canada additional tariffs in April could lift some of the fog that’s been eroding market confidence and holding back activity. However, we don’t see a meaningful rebound as long as trade uncertainty lingers.
Toronto area: Downturn is deepening
Eroding confidence and rising supply are deepening the Toronto area’s downturn, and driving home prices lower. Sales transactions in April were the weakest in 30 years (outside the 2020 COVID-19 lockdown)—making it the second-straight month of exceptionally soft activity.
The flow of sellers into the market remains strong, though. This further boosts the inventory of homes for sale and tips the supply-demand scale even more in buyers’ favour. In fact, the situation hasn’t been this favourable for buyers since the early 1990s—marked by hefty price declines.
Indeed, a material correction in property values is now underway. Toronto’s composite MLS HPI fell in five of the last six months, down -0.7% between March and April, and -4.4% ($49,000) since December to $1.07 million.
We expect prices to continue falling in the near term as sellers fiercely compete to get deals done, while trade worries weigh on sentiment.
Montreal area: Holding its ground
Heightened economic uncertainty is reverberating through the Montreal area’s housing market, but its effect so far has been relatively contained. Home resales have largely stabilized (down just -0.2%) since falling nearly 12% in the first two months of the year.
The trade war hasn’t stopped sellers from entering the market. New listings continue to trend higher—even accelerating in April.
This creates a more balanced environment for buyers and sellers following tight conditions last year.
For now, property values remain on a rising trajectory. Median prices were up for single-family homes and condo apartments in April from March (2.5% and 1.1%, respectively) and a year ago (8.7% and 6.1%, respectively).
However, we see the rate of increase slowing in the months ahead as supply-demand conditions continue to tilt in the buyer’s favour.
Vancouver area: Buyers are in command
Spring weather is attracting sellers to the market, but buyers are holding out—perhaps waiting for more clarity on toll the trade war may take. Home resales were stable at a two-year low in April.
Increases in homes put up for sale this year have significantly expanded buyers’ options. This gives them more time to decide and, importantly, strengthen their bargaining power.
Home prices are dropping as a result. Vancouver’s composite MLS HPI fell sequentially in the past four months, and is down -1.8% from a year ago.
We think buyers will continue to use their power to extract price concessions from sellers in the months ahead—quite possibly at an accelerating pace.
Calgary: Market re-balancing is underway
The trade war hasn’t spared Calgary’s market. It spooked many potential buyers and significantly moderated solid sales momentum from the start of this year. Transactions have sagged markedly in the last three months to a five-year low in April.
It comes at a time when housing supply has continued to rebound from a cyclical trough in early-2024—thanks in part to strong construction.
But, shifting market conditions have significantly dialed down the heat on home prices. The composite MLS HPI dropped below year-ago levels for the first time since 2020 in April (-1.4%).
We see further mild declines ahead as the re-balancing process continues.
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Robert Hogue is the assistant chief economist responsible for providing analysis and forecasts on the Canadian housing market and provincial economies. He joined RBC in 2008.
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