Canadian Housing Market Set for Stability, with Prices Projected to Increase by 6% in 2025

The Canadian housing market is set to find its footing in 2025, as lower interest rates and new lending rules are expected to attract more buyers. The real estate company predicts that the average home price in Canada will rise by 6% year-over-year, reaching $856,692 by the fourth quarter of 2025, aligning with long-term trends.

Single-family detached homes are expected to see a 7% price increase, hitting a median value of $900,833, while condos are forecast to grow by 3.5%, reaching $605,993. "There’s a growing backlog of buyers ready to enter the market, and upcoming changes to mortgage lending rules will help boost Canadians' borrowing power," says Phil Soper, President and CEO of Royal LePage.

Regional Price Trends: A Strong Demand Across Canada

The forecast suggests price growth in major Canadian markets, with Quebec City leading the way with an 11% price increase. Edmonton and Regina are expected to see a 9% gain each. Greater Montreal is predicted to rise by 6%, while the Greater Toronto Area is projected to grow by a more moderate 5%. Metro Vancouver is expected to see a 4% increase.

Good News for First-Time Buyers: New Lending Rules

Starting December 15, 2024, new mortgage rules are expected to help first-time buyers and those purchasing new homes. These changes include eligibility for 30-year amortizations on insured mortgages and an increase in the mortgage insurance cap from $1 million to $1.5 million.

First-time buyers will be the main beneficiaries of these changes, as they’ll be able to borrow more with a smaller down payment, bringing them closer to owning their first home. This will likely encourage more builders to start new projects, which is exactly what the market needs.

What to Expect in 2025

The first quarter of 2025 is expected to bring the strongest gains, driven by an early spring market. National home prices are projected to rise 2% from Q4 2024 to Q1 2025. After that, growth is expected to slow slightly, with 1.5% gains in the second and third quarters, and 1% in the final quarter of the year.

2025 will bring a sense of normalcy to the market. After a few years of unusual ups and downs, the signs point to a return to stability next year. The recent shift in the Bank of Canada’s monetary policy—from focusing on fighting inflation to boosting the economy—has contributed to this optimism.