By Indradip Ghosh and Mumal Rathore

BENGALURU (Reuters) – Canada home prices are set to decline 2% this year and stagnate in 2026, marking a significant downgrade from previous expectations of modest increases, according to a Reuters poll of property experts concerned about the U.S.-led trade war.

Like many sectors, the housing market has been impacted by U.S. President Donald Trump’s tariffs on steel, aluminum, and automobiles, alongside Canada’s retaliatory duties.

Worsening business sentiment and fears of job losses have weakened home buyer confidence. Increased housing supply has contributed to an approximate 3% decline in average house prices this year.

The Bank of Canada’s aggressive 225 basis point interest rate cuts over the past year have helped avert a steeper decline. In fact, sales rose last month, largely due to improved affordability for first-time buyers.

According to a June 13-25 Reuters poll of 16 housing experts, average home prices are expected to fall by 2.0% nationally this year, contrasting with a predicted 2.0% rise in a March survey.

“Uncertainty (over U.S. policies) has definitely paralyzed the housing market, impacting businesses’ spending and hiring. Buyers are worried about job security and housing affordability, putting them on the sidelines,” said Tony Stillo, director of Canada economics at Oxford Economics.

Looking forward, if a modest recession occurs, the trade war risks deepening and prolonging the downturn through late 2025. Expected stagnation in average home prices next year differs from a previous forecast of a 3.4% rise just three months prior.

Home prices in Toronto are projected to decline by 4.0%, while in Vancouver, a drop of 2.0% is expected in 2025. Nonetheless, these anticipated declines are less steep than the reductions reported so far this year, suggesting a potential modest recovery.

Market expectations include at least one more interest rate cut this year, which may help stabilize the market. Sal Guatieri, senior economist at BMO Capital Markets, stated, “We expect home prices to weaken over the next two or three months, but to stabilize later this year and resume moderate recovery in 2026.”

This prediction hinges on two factors: de-escalation of the trade war and further interest rate cuts from the BoC, estimated at an additional 75 basis points early next year.

Among respondents, 10 out of 12 believe affordability for first-time homebuyers will improve over the next year, even though average home prices remain over ten times the average annual income.

Regarding the availability of affordable homes, 10 respondents forecast a marginal increase compared to 2024, while one anticipates a significant rise.

Robert Hogue, assistant chief economist at RBC, commented, “While we expect affordability to improve slightly, it may only reverse half the pandemic losses, without returning to pre-pandemic levels. Transformational changes are needed for a substantial impact.”

(Other stories from the Q2 global Reuters housing poll)

Canada home prices to decline 2% as trade war hits homebuyer confidence

By Indradip Ghosh and Mumal Rathore

Comments (5)

Cancel

Canada home prices to decline 2% as trade war hits homebuyer confidence

By Indradip Ghosh and Mumal Rathore

Comments (5)

Cancel

Submit your comment

Thank you!

Report this comment

Thank you!

Currency