The Canadian real estate market is expected to see a significant rebound in 2025, according to the latest forecast from the Canadian Real Estate Association (CREA). As interest rate expectations shift, the outlook for national home sales and prices has been revised, reflecting a more pronounced recovery next year.
Evolving Interest Rate Expectations and Market Impact
Since CREA’s summer forecast, the projected timeline for interest rate cuts has changed dramatically. Markets now anticipate the Bank of Canada will return to a “neutral” rate by spring or summer of 2025, rather than following the multi-year path that was previously expected. This shift has altered homebuying behavior, with many potential buyers opting to wait for more favorable mortgage rates before entering the market.
Earlier forecasts suggested a steady return of buyers following the first rate cuts in the summer of 2024. However, the market has remained relatively stagnant, suggesting that prospective homebuyers—particularly those considering short-term fixed-rate mortgages—are holding off in anticipation of lower borrowing costs.
As a result, CREA’s sales projections have been adjusted. Instead of a gradual recovery, the market is now expected to remain in a holding pattern until the spring of 2025, when a stronger resurgence in demand is forecast.
Revised Sales and Price Forecasts for 2024 and 2025
CREA predicts that 468,900 residential properties will be sold through Canadian Multiple Listing Service® (MLS®) Systems in 2024, marking a 5.2% increase from 2023. The national average home price is expected to see only modest growth, rising by 0.9% to $683,200 by the end of the year.
A more significant increase is forecast for 2025 as interest rates continue to decline and demand strengthens. National home sales are expected to climb 6.6%, reaching 499,800 units. Meanwhile, the national average home price is projected to rise by 4.4%, bringing it to $713,375.
With the real estate market closely tied to interest rate movements, all eyes are now on the Bank of Canada’s next rate announcement, scheduled for Wednesday, October 23, 2024. The decision will provide further insight into the timing and extent of future rate cuts, which are expected to play a key role in shaping the housing market’s trajectory.
As buyers and sellers adjust their strategies based on interest rate trends, 2025 is poised to be a year of renewed momentum in Canadian real estate, with a stronger recovery anticipated in the latter half of the year.
