The outlier affecting the real estate market, not just in Ontario but across Canada, is the impact of U.S. tariffs on our economy. This is a complex scenario with many moving parts, making it difficult to predict exact outcomes. However, one thing is clear: the implications could be significant as the uncertainty they create is far reaching.
Canadian MLS® Systems saw a double-digit surge in new listings in January 2025 compared to December 2024. However, sales activity slowed at the end of the month, likely due to uncertainty surrounding what was then a potential trade war with the United States. Home sales declined by 3.3% month-over-month in January, with most of the drop occurring in the final week of the month as the tariffs began to come into focus.
Meanwhile, the number of newly listed homes jumped by 11% from December—the largest seasonally adjusted monthly increase in new supply on record (excluding pandemic-related volatility) since the late 1980s.
“The standout trends to begin the year were a big jump in new supply at an uncommon time of year, as well as a weakening in sales which only showed up around the last week of January,” said Shaun Cathcart, CREA’s Senior Economist. “The timing of that change in demand leaves little doubt as to the cause – uncertainty around tariffs. Together with higher supply, this means markets that had been steadily tightening up since last fall are now suddenly in a softer pricing situation again, particularly in British Columbia and Ontario.”
It's not just the tariffs themselves—it’s the uncertainty they create, weighing heavily on both buyers and sellers. Hesitation around major capital investments is only overshadowed by the anxiety of current owners, unsure if they’ll still have a job next month.
According to the latest Bank of Canada report, Evaluating the Potential Impacts of U.S. Tariffs, several possible scenarios are outlined, all pointing toward higher costs for many goods imported from the U.S. While I’m not an economist, it seems evident that such price increases will lead to higher inflation, which may, in turn, will erode consumer confidence.
A recent report released from
Scotiabank Economics, states that retaliation on tariffs from the Canadian government, can cause up to a 3% interest rate hike. The Canadian real estate market is already experiencing weak sentiment and these additional pressures have the potential to exacerbate the stagnation we’re currently seeing.
The cottage market in Ontario could see particular vulnerability as it could create the perfect storm of low buyer confidence on top of the existing supply / demand challenges with looming inflationary pressure.
