By Indradip Ghosh and Mumal Rathore
BENGALURU (Reuters) -Canada home prices are set to decline 2% this year and stagnate in 2026, a significant downgrade from expectations of modest rises just three months ago, according to a Reuters poll of property experts who showed significant concern over the U.S.-led trade war.
Like most segments of the economy, the housing market has been dented by U.S.
President Donald Trump’s barrage of tariffs on steel, aluminum and automobiles and Canada’s own set of duties in retaliation.
Fears of job losses due to worsening business sentiment have dragged home buyers’ confidence.
That, along with increasing supply, has led to an around 3% decline in average house prices so far this year.
The Bank of Canada’s swift 225 basis points of interest rate cuts over the past year have prevented a deeper slump.
Also, sales were up last month partly due to improving affordability, mainly among first-time homebuyers.
Average home prices will fall 2.0% nationally this year, according to the June 13-25 Reuters poll of 16 housing market experts, in contrast to a prediction of a 2.0% rise in a March survey.
“Uncertainty (around U.S.
policies) has definitely paralysed the housing market, and it’s done more than that. It’s also affected businesses in terms of their capital spending plans and their hiring. Buyers are concerned about job security and being able to afford a house, so they’re on the sidelines,” said Tony Stillo, director of Canada economics at Oxford Economics.
“Looking forward, if there’s a modest recession…the trade war could deepen the downturn and extend it through end-2025.”
Average home prices are now expected to stagnate next year, compared to a 3.4% rise predicted just three months ago.
Home prices in Toronto are predicted to fall 4.0% and 2.0% in Vancouver, respectively, in 2025.
Still, expected price falls are shallower compared with how much they have already been reported down so far this year, suggesting a modest recovery ahead.
Expectations of at least one more rate cut this year may also put a floor under the market.
“We expect home prices, though likely to weaken over the next two or three months, to stabilise later this year and then to resume moderate recovery in 2026,” said Sal Guatieri, senior economist at BMO Capital Markets.
“Now that’s all predicated on two things.
One, the trade war de-escalates and two, the BoC will resume cutting interest rates – we believe by a further 75 bps reduction by early next year.”
Most respondents, 10 of 12, said affordability would improve for first-time homebuyers over the coming year.
Average home prices are still over 10 times the average annual income.
Asked about the supply of affordable homes over the coming year, 10 said it would increase marginally compared to 2024 and one said increase significantly.
“We expect affordability will continue to improve, but only modestly.
It could maybe reverse half of the loss during the pandemic, but still not going to be back to what it was before the pandemic,” said Robert Hogue, assistant chief economist at RBC.
“Hopefully, lower building costs or some efforts to reduce regulatory fees will help out at the margin…but it probably would need more than that.
We need some more transformational changes to really make a difference.”
(Other stories from the Q2 global Reuters housing poll)
(Reporting by Indradip Ghosh and Mumal Rathore; polling by Renusri K; Editing by Ross Finley)
