Dwayne Linton

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity and average home prices via the Multiple Listing Service® (MLS®) Systems of Canadian real estate boards and associations and expanded the outlook to include 2026.

CREA’s latest forecast is little changed from the fall 2024 outlook. The assumption remains that the combination of two and a half years of pent-up demand and lower borrowing costs, together with the usual burst of spring listings will lead to a rebound in market activity across the country in 2025. There was a good preview of what that might look like during the fourth quarter of 2024.

In addition to lower mortgage rates, the expectation the Bank of Canada may soon signal that interest rates are about as low as they are likely to go in this easing cycle could spur even more demand from those who have been waiting for the right time to lock in a fixed-rate mortgage.

This rebound in demand is expected to play out differently across Canada, with British Columbia and Ontario expected to see bigger rebounds on the sales side owing to how low sales are there currently, together with more plentiful inventories, and less scope for price gains in these already expensive parts of the country.

By contrast, increased demand is expected to play out more on the price side in Alberta and Saskatchewan where sales were already near record levels in 2024, inventories are currently near-20-year lows, and prices are still relatively more affordable.

Manitoba, Quebec, and the Atlantic provinces are all expected to fall between these extremes, with both more sales and higher prices in 2025.

CANADA HOUSING MARKET: YEAR IN REVIEW

Canada’s national housing market slowed down to close 2024. National sales fell 5.8% (sa m/m) in December. New listings continued to pull back, dropping for the third month in a row by 1.7%.

National sales in December of 2024 were 19% higher than the same month in 2023; new listings were 10% higher. Despite December’s decline, sales in the last quarter of the year were 10% above the previous quarter.

The larger decline in sales relative to listings meant the sales-to-new listing ratio, a measure of the market’s tightness relative to historical averages and deviations, eased again after relatively steep increases the prior two months. The ratio stood at 56.9% in December, down from November’s 59.3% and only slightly above the mid-point of the balanced conditions’ zone (estimated between 44.7% and 66.1%). Months of inventory also signalled easing following the national market moves in December, climbing up to 3.9 from November’s recent low of 3.6, but still below its long-term average of 5 months of inventory. However, according to CREA, December’s 3.9 is within the lower range for a balanced market based on one standard deviation, making anything below 3.6 months within buyers’ territory.

The year as a whole recorded 7.3% more sales than in 2023, 11.2% more listings, and 0.9% higher average selling price—the opposite of the 2023 tally that saw all measures below their prior year average. The only exception is the sales-to-new listings ratio, which continued to ease from its 2021 peak of 77.9%. Sales in 2024 were just -0.1% below their 2010–19 annual average, while listings were 2.6% above.

With much of the early fall surge of supply having now been picked over, home sales activity recorded over Canadian MLS® Systems dipped in December 2024.

Sales were down 5.8% compared to November, but still stand 13% above where they were in May, just before the first interest rate cut by the Bank of Canada in early June.

The fourth quarter of 2024 saw sales up 10% from the third quarter and stood among the stronger quarters for activity in the last 20 years, not accounting for the pandemic.

“The number of homes sold across Canada declined in December compared to a stronger October and November, although that was likely more of a supply story than a demand story,” said Shaun Cathcart, CREA’s Senior Economist. “Our forecast continues to be for a significant unleashing of demand in the spring of 2025, with the expected bottom for interest rates coinciding with sellers listing properties for sale in big numbers once the snow melts.”

December Highlights:

• National home sales fell 5.8% month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 19.2% above December 2023.
• The number of newly listed properties dipped 1.7% month-over-month.
• The MLS® Home Price Index (HPI) climbed 0.3% month-over-month and was only down 0.2% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price was up 2.5% on a year-over-year basis.

Summary

• Home sales increased 2.8% between October and November, a fourth consecutive monthly gain that follows a 6.8% jump in October.
• On the supply side, new listings decreased by 0.5% compared to October, the second monthly decline in a row.
• Active listings remained stable from October to November. With the increase in sales, the number of months of inventory (active listings-to-sales) decreased for a fourth month in a row, moving from 3.8 in October to 3.7 in November.
• Market conditions tightened during the month and were tighter than their historical average in most provinces, while they remained roughly “balanced” in B.C. and Ontario.
• Housing starts increased 8% (+20.2K) in November to 262.4K (seasonally adjusted and annualized), beating the median economist forecast which called for a 245.1K print. October’s figure was also revised up slightly by 1.4K to 242.2K. The monthly increase was driven by a rise in urban starts (+20.6K to 245K), which was mainly supported by an 11% increase in the multi-unit segment (to 195.3K). Meanwhile, single-detached urban starts increased 1.8K to 49.8K. Starts were down in Toronto (-2.7K to 26.7K) and Calgary (-1.5K to 30.1K), but up in Montreal (+14.9K to 31.3K) and Vancouver (+1.6K to 32.0K) during November. At the provincial level, the most notable increased were registered in Nova Scotia (+1.4K to 5.6K), New Brunswick (+1.4K to 6.1K), Quebec (+10.7K to 53.3K), and British Columbia (+8.1K to 48.6K). On the other hand, declines were seen in P.E.I (-88% on the month, or -1.1K to 158), Manitoba (-1.2K to 7.1K), and Ontario (-5.3K to 59.4K).
• The Teranet–National Bank Composite National House Price Index by 0.6% from October to November after adjustment for seasonal effects. Ten of the 11 markets in the composite index were up during the month: Quebec City (+2.2%), Halifax (+1.7%), Hamilton (+1.5%), Montreal (+1.3%), Vancouver (+1.2%), Victoria (+0.9%), Winnipeg (+0.9%), Ottawa-Gatineau (+0.4%), Calgary (+0.3%) and Toronto (+0.1%). Conversely, there was a decline in Edmonton (-0.8%).

Highlights

• Rental market conditions across Canada's large urban centres remained tight despite lessening market pressures in some centres due to record level growth in supply outpacing strong demand.
• The average vacancy rate for purpose-built rental apartments1 rose to 2.2% in 2024 from 1.5% in 2023, remaining below the 10-year historical average of 2.7%.
• Average rent growth slowed, with rents for 2-bedroom units rising by 5.4%2, down from the record 8.0% in 2023.
• Rents increased by 23.5% when units turned over, which is close to 2023 rates. Rent hikes on turnover units accounted for more than 40% of the overall rent increase.
• Despite the slowdown in rent growth, renter affordability remained strained. The increase in rental stock was driven by newly completed, higher-priced units, which were unaffordable for many renters and primarily served higher-income households.

From Scotiabank

All Canadian provinces are poised for better growth in 2025, despite anticipating stronger policy headwinds in late 2025 and 2026 from both domestic and international fronts. Consumption is expected to accelerate over the next few quarters, driven by the Bank of Canada’s rate cuts, which will alleviate household financial pressures, further supported by excess savings and fiscal stimulus. Residential investment is set to surge, fueled by lower financing costs and robust demand in an under-supplied market, driving economic expansion as we enter the new year. The rebound in interest rate-sensitive sectors, while beneficial for all provinces, is particularly promising for Ontario and British Columbia (B.C.), which have experienced notable contractions in housing activities. Policy uncertainty from the new U.S. administration poses a significant risk. Despite the lack of clarity on the path ahead, we have made some attempt to incorporate potential policy changes in our current forecast.

Household spending is set to accelerate in 2025, driven by the Bank of Canada’s rate cuts, elevated savings, and fiscal stimulus. Consumption held up solidly over the course of this year and has shown signs of picking up in the third quarter, surpassing expectations. Posting strong headline gains in the second half of this year, retail sales data highlights exceptional strength in the Atlantic provinces, although B.C. and Ontario experienced some soft patches. Despite the continued drag from ongoing mortgage resets, households should be able to manage higher mortgage payments by adapting saving and spending habits. As interest rates decline, this impact will also ease, paving the way for increased consumption. We anticipate a broad-based surge in household spending, fueled by stimulus cheques from Ontario and eventually B.C., as well as the federal government, GST/HST cuts, and mortgage rule changes as we move into 2025. This combination of factors sets the stage for a rebound in growth, with consumer confidence and spending power on the rise.

Strong labour market conditions support consumption growth. After a period of cooling since the latter half of last year, employment growth stabilized and remained steady throughout 2024. However, employment gains have consistently lagged behind the rapid expansion of the labour force, driving up unemployment rates nationwide. This cooling trend is particularly evident in Quebec and Ontario, where employment growth slowed sharply, though recent signs of stabilization and recovery have begun to emerge. In Alberta, job gains have shown signs of weakening despite rapid population growth, following strong outperformance up until early this year. The Atlantic provinces have bucked the trend, with robust job gains outpacing strong labour force growth, indicating remarkable economic momentum. We anticipate that the worst of the unemployment rate deterioration is behind us and expect unemployment rates to stabilize around levels just above the non-accelerating inflation rate of unemployment (NAIRU) over the next few quarters.