Q1 Sales Activity and Transaction Trends

As of early 2025, Ontario’s real estate market is experiencing a dynamic shift characterized by increased sales activity, rising prices, and evolving buyer preferences.  Additionally we seen a dramatic shift in mortgage product selection with more then 85% of transactions are Variable Mortgages with rates anywhere between 4.19% to 4.50% depending on Insurability.

Email me directly at Matt@HuronMortgages.ca or Matt@BLDFinancial.ca for more information.

In January 2025, the Greater Toronto Area (GTA) saw a 10% rebound in home sales, reaching 5,971 units. However, this figure still represents a 10.7% decrease compared to January 2024. The Toronto Regional Real Estate Board (TRREB) reported that new listings rose by 26% from December and surged 48.6% year-over-year. Despite these fluctuations, the average home price in the GTA remained relatively stable, with the home price index at approximately C$1,089,300, reflecting a minor year-over-year increase of 0.7%.

Looking ahead, TRREB projects that GTA home sales will reach 76,000 units in 2025, marking a 12.4% increase over 2024. The average selling price is expected to rise by 2.6% to C$1,147,000, with single-family homes likely experiencing stronger price growth compared to the well-supplied condo apartment market.

At the provincial level, the Canadian Real Estate Association (CREA) forecasts that national home sales will increase by 8.6% in 2025, totaling approximately 532,704 units. The national average home price is anticipated to climb by 4.7% year-over-year to C$722,221.

Market Dynamics and Buyer Behavior

The Ontario housing market is witnessing a notable increase in inventory levels. By January 2025, active residential listings had surged by 35.7% year-over-year, reaching 44,913 units—the highest January figure in over a decade. This surge is attributed to a combination of new housing developments and existing investors opting to sell amid changing market conditions.

Interest rates continue to play a significant role in shaping market dynamics. The Bank of Canada has implemented multiple interest rate cuts since mid-2024, aiming to stimulate economic activity. These reductions have improved affordability for some buyers, contributing to the observed uptick in sales. However, despite lower rates, high home prices and reduced purchasing power persist, particularly in more expensive regions like Ontario.

Regional Updates

Let’s take a moment to explore some of the major markets that experienced a range of seasonal irregularities and interesting fluctuations.

• Ottawa: The average home price reached C$670,258 in January 2025, marking a 6.1% year-over-year increase. Ottawa’s robust job market, especially in the public sector, continues to attract homebuyers.
• Hamilton and Niagara: Hamilton’s average home price stood at C$757,071, a 4.8% year-over-year decrease. In contrast, Niagara North experienced a 24% increase, with average prices at C$913,731. These regions appeal to young families and retirees seeking a balance between urban amenities and a quieter lifestyle.
• Kitchener-Waterloo and London: Kitchener-Waterloo saw a slight decline of 0.8% in average home prices, bringing them to C$755,859. London experienced a 5.6% increase, with average prices at C$639,486. Both regions are attractive to first-time buyers and investors, driven by growing tech sectors and employment opportunities.

Outlook for Spring 2025

As we look toward spring 2025, Ontario’s real estate market is expected to stay active, driven by several key factors. Economic recovery is predicted to boost consumer confidence and purchasing power, supporting housing demand. Lower borrowing costs, following previous rate cuts by the Bank of Canada, are likely to improve affordability and attract more buyers. Additionally, higher inventory levels could offer more choices for buyers, potentially easing price growth and contributing to a more stable market.

Expect an influx of multi-generational housing projects to emerge in the market sooner rather than later. These developments will play a key role in addressing Ontario’s long-standing issue of limited housing supply.

There are challenges that will continue for the foreseeable future; housing affordability is still hampered by the Stress Test.   Supply will continue to be an issue well into 2026.  There is uncertainty in our Federal political scene along with the episodically unbalanced leader on the other side of our southern border. 

Challenges will persist, particularly in addressing housing affordability. Despite lower interest rates, high home prices and reduced purchasing power continue to pose barriers for many potential buyers.  Additionally, the condominium market continues to face headwinds due to the slowdown in pre-construction sales and investor activity, which is impacting new construction and supply.

Overall, while the Ontario real estate market shows signs of recovery and increased activity, it remains influenced by a complex interplay of economic, financial, and demographic factors.

Tariff Update

Donald Trump announced that starting March 4, a 25% tariff will be imposed on goods imported from Canada and Mexico, along with a 10% duty on Chinese goods. He explained that these tariffs are essential to tackle the flow of illegal drugs, specifically fentanyl into the U.S. and stated they would remain in place until the issue is resolved.

Fentanyl

During the 2024 fiscal year (October 2023 to September 2024), the U.S.-Mexico border seized a whopping 21,148 pounds of fentanyl. Meanwhile, at the Canada-U.S. border, U.S. Customs and Border Protection (CBP) managed to snag a tiny 43 pounds. That’s just 0.2% of the total fentanyl seized across all U.S. borders. Clearly, when it comes to drug trafficking, the Canada-U.S. border is a major hotspot.

Trump also indicated that reciprocal tariffs on major trading partners would begin in April.  He has continued to push for various duties, including those on steel, pharmaceuticals, autos, and aluminum.  You read correctly, aluminum.

Aluminum and Electricity

The U.S. imports aluminum from Canada mainly because of Quebec’s vast mineral deposits and its abundant hydroelectric power, which gives it a competitive edge in aluminum manufacturing.

In 2024, Canada exported around 2.95 million tons of aluminum to the United States, significantly surpassing the U.S.’s own production capacity which site at 1.12 million tons.

In 2024, Canada exported around 33 terawatt-hours (TWh) of electricity to the United States, making up roughly 90% of the U.S.’s total annual electricity imports. This significant export underscores Canada’s crucial role in supplying electricity to meet the U.S.’s energy needs.

To replace the electricity Canada exports to the U.S., it would require the self proclaim construction czar, Drumpf – my apologies, I meant Trump, I keep forgetting they changed their name after they arrived in New York as immigrants from Germany; – To replace the energy it would require 5 nuclear plants. The quickest a nuclear power plant has ever been constructed was in just over 4 years by the Japanese.

On a related note; I don’t know how long it takes to build a wall between the U.S. and Mexico. I wonder if that ever was completed.

Probable Tariff Impact – US Economy

Despite experiencing short-term shocks, Canada’s economy remains diversified and relatively resilient, supported by strong domestic demand, a stable financial system, and the ability to adapt. Over the long term, both the U.S. and Canada would suffer due to their highly interdependent economies. While a tariff war could put strain on both nations, the U.S. will feel a more significant impact in the short term; and it will happen very swiftly and it will begin immediately will inflation.

Rising inflation will make everyday essentials like food, gas, and rent more expensive, especially hurting those with fixed incomes or lower wages. As prices rise faster than wages, household budgets are strained. The Federal Reserve may raise interest rates to control inflation, but global supply chain issues and trade conflicts are worsening shortages and driving up prices. Energy costs will also rise, impacting everything from transportation to goods. This leads to a wage-price spiral, where higher wages push prices even higher. Inflation also reduces the value of savings and struggles with investments like bonds. Additionally, U.S. inflation affects global supply chains and commodity prices, impacting countries that rely on U.S. markets or the dollar.

How this Likely Ends

Around the 6-8 week mark, Trump will likely create, market, and sensationalize a new “Urgent Issue.” A Canadian federal election is expected to be called after March 9th, following a likely vote of no confidence in the government in Parliament. Trudeau has already signaled his intent to step down, ensuring a new Prime Minister. This new leader will be praised by Trump, serving as the perfect distraction to end the Canadian trade war, which will have severely impacted the U.S. economy, and to a lesser extent, the Canadian economy.

Conclusion

While discussing Trump’s latest actions isn’t my preference, it’s important to address them when necessary. In my opinion, the impact on the Ontario real estate market will likely be minimal, especially if the situation is short-lived. Ontario faces larger, more pressing issues affecting all asset classes that take priority over this matter. A detailed analysis of these issues will be provided in the next Bank of Canada’s Monetary Policy Report, set for release on March 12th.