The predicted decline of interest rates along with new lending rules will bring buyers back to the market next year.

Highlights:

• Royal LePage forecasts that the aggregate price of Canadian homes will increase by 6.0 percent year-over-year in the fourth quarter of 2025.

• Nationally, single-family detached and condominiums are expected to increase 7.0 percent and 3.5 percent, respectively, year over year in Q4 of 2025.

• The Greater Montreal Area aggregate home price appreciation (6.5 percent) is expected to outpace greater regions of Toronto (5.0 percent) and Vancouver (4.0 percent) this next year.

• Quebec City is forecasted to see the highest gains of all major regions in 2025, with the aggregate home price predicted to rise 11.0 percent, followed by Edmonton and Regina at 9.0 percent.

“After several years of unusual volatility in the real estate market key indicators point to a return to stability in 2025.  The backlog of willing and able buyers continues to grow, and upcoming changes to mortgage lending rules will further enhance Canadians’ borrowing power”, said president and chief executive officer Phil Soper, at Royal LePage. “Most notably the Bank of Canada’s shift from ‘inflation fighter’ to ‘economy booster’ has taken time to influence buyer behaviour.  We saw a marked increase in market activity at the start of the fourth quarter, following the Bank of Canada’s 50 basis point rate cut.  Buyers now believe home prices have hit bottom and are eager to act before competition intensifies.” 

Home prices are expected to increase in 2025 in all major markets across the country. Greater Vancouver is expected to see moderate gains of 4.0%.

Tightening supply to favour sellers, drive price gains

From one region to the next, housing supply levels have contrasted for months; some markets have been reeling from a chronic supply shortage, while others have watched inventory levels steadily climb. As 2025 approaches and buyers become more active, inventory will tighten across the country.

“Over the past several months, supply has been building in the Toronto and Vancouver real estate markets as sellers responded to early interest rate cuts by listing their homes. However, with home prices in these cities remaining high, many sidelined buyers continued to wait for more favourable borrowing conditions. Flat property prices also reduced the urgency often driven by fears of ‘missing out,’ creating a temporary stalemate where inventory lingered, and buyers hesitated to act. By mid-fall, this dynamic began to shift as buyers re-engaged with the market,” said Soper.

Sidelined buyers are being encouraged back to the market after four consecutive rate cuts by the central bank and optimism of more to follow. The Bank of Canada’s overnight lending rate currently sits at 3.75%, the lowest in over two years.

“We expect the boost in buyer activity that began in October will extend to a busier-than-normal winter and a pull-ahead of the spring market,” added Soper.

New lending policies to give first-time buyers a leg up

A series of new lending regulations are set to take effect this month, creating greater accessibility for both first-time buyers and current homeowners. As of Dec. 15th, eligibility for 30 year amortizations on insured mortgages will be expanded to all first-time homebuyers and to all purchasers of new construction properties, up from the current 25 year threshold. In addition, the mortgage insurance cap will increase from $1 million to $1.5 million, allowing buyers with a down payment of less than 20% the opportunity to explore housing options at a higher price point. This will be especially impactful for homebuyer hopefuls in the country’s priciest real estate markets, where average property values often exceed $1 million.

“Improved lending conditions, combined with declining interest rates, will unlock new housing opportunities for many Canadians in the new year. First-time buyers will be the primary beneficiaries of these initiatives, as their ability to borrow more for less with a smaller down payment will help bring them closer to their first home purchase,” said Soper. “We believe the return of buyers to the market will encourage builders and trigger a wave of new supply, which is very much needed.”

In October, the Office of the Superintendent of Financial Institutions (OSFI) announced that it would eliminate the mortgage stress test requirement for uninsured borrowers who switch lenders upon renewal, provided there is no change to the loan amount or amortization period. This change came into effect on November 21st.

“Mortgage holders with upcoming renewals will also feel some relief, knowing that they can explore their options with other lenders without having to requalify under the stress test. And, banks will be encouraged to offer more competitive rates in order to attract new clients and retain current clients,” said Soper. “Despite the anxiety some may be feeling about their loans renewing over the coming year, it is worth noting that most would have qualified – thanks to the strict mortgage stress test rules – at a higher rate four or five years ago than the current market rates available today. In other words, the stress test has done its job in keeping the vast majority of Canadians safe from mortgage default.”

In an effort to achieve well managed, sustainable growth in the long-term, the federal government has recently announced a reduction in its immigration targets for 2025 and 2026, down from 500,000 each year to 395,000 and 380,000, respectively. This includes a reduction in the number of temporary foreign workers. These reduced targets remain above pre-pandemic levels.

The changing Canadian landscape

2025 will bring a change in government south of the border, and potentially in Canada’s House of Commons.  New leadership, in addition to evolving trade relations, immigration policies and global conflict, could meaningfully alter the state of the Canadian housing market. 

“With an election approaching in Ottawa and a new administration preparing to take office in Washington, the housing market faces potential disruptions. Here at home, a federal election will see new housing policies that may temporarily impact market activity in the second half of 2025,” said Soper.  “Meanwhile, south of the border, the incoming Trump administration’s trade policies and broader economic agenda have the potential to create ripple effects for Canada’s economy and housing market.  While these impacts may take time to unfold, they could eventually affect consumer confidence and market dynamics on both sides of the border.”

Quarterly forecast

Nationally, home prices are forecast to see the strongest quarterly gains in the first quarter of 2025, with more moderate increases expected in the latter half of the year.  The aggregate price of a home in Canada is forecast to be 2.0% higher in Q1 of 2025 compared to the final quarter of 2024, due to strong activity in the spring market. This is followed by expected price gains of 1.5% each in the second and third quarters, heading into the winter months.  And, a modest 1.0% increase in the final quarter of 2025.

Greater Vancouver Market Summary

In Greater Vancouver, the aggregate price of a home in the Q4 of 2025 is predicted to increase 4.0% year-over-year to $1,271,712.  During the same period, the median price of a single family detached property is forecasted to rise 2.0% to $1,766,334, while the median price of a condominium is forecast to increase 4.5% to $795,141.

“After months of stalled activity, sales in Greater Vancouver’s housing market began to pick up in October, signaling the turning point of renewed momentum. As borrowing conditions improve, sidelined buyers are re-entering the market”, said Randy Ryalls, managing broker of Royal LePage Sterling Realty. “There’s been a shift in consumer sentiment, with many buyer hopefuls feeling the market has bottomed out.  This has brought buyers back to the table and set the stage for an active and early spring market.” 

Ryalls also noted that competition has been increasing for most property types.  Even those that have been on the market for some time are selling in multiple offer scenarios. 

“Looking ahead to 2025, price-gains in the condo and townhome segments are expected to outpace those of single family detached homes, given the relative affordability of these property types”, added Ryalls. “Inventory is already thinning out.  I anticipate that demand will outstrip available supply next year as improved lending conditions draw more and more sidelined buyers back to the market.” 

Royal LePage 2025 Market Survey Forecast Table: rlp.ca/table-2025-forecast

Explore detailed insights into Canada’s evolving housing market, the impact of economic policies, and projections for 2025. For more detailed findings and expert analysis, read the full report.