If you’ve been watching the housing market in Canada, you likely noticed that prices and demand cooled in many parts of the country earlier this year.
In March, national home sales fell 4.8% compared to February, according to the Canadian Real Estate Association (CREA). The MLS Home Price Index, which tracks neighbourhoods’ home price levels and trends, also dropped 1% during the same month-over-month period.
But things look like they’re changing – albeit slowly.
So, what’s in store for the rest of 2025? We spoke to TD Economist Rishi Sondhi about what Canadians could expect.
Slightly stronger housing market for the second half of 2025
Spring has seen a slight uptick in home sales – a trend that could continue throughout the rest of the year.
In May, Canadian home sales were up 4% month-over-month after inching higher in April. This performance was followed by a 3% monthly gain in June. That being said, economic uncertainty remains, Sondhi said.
Due to tariffs, exports to the U.S. are down 14% as of May versus a year ago, and consumers have shied away from major purchases like homes as they worry about possibly losing their jobs or earning lower revenues in their businesses, reports TD Economics.
“U.S.-Canada trade tensions and job markets are significant factors that can affect housing demand and prices,” Sondhi said. “So, even if housing sales levels improve, they are likely to remain subdued compared to peak pandemic levels due to this market uncertainty, particularly in B.C. and Ontario.”
Ontario and B.C. may still be sluggish
Building on the theme of subdued, the strength of the real estate market won’t likely be equal across Canada for the rest of the year.
While TD Economics has nudged up its average home price growth forecast for the second half of 2025, Sondhi said quarterly price growth will be the firmest in the Prairies. That’s because the market there is “tighter,” Sondhi said, meaning supply and demand levels are more in the favour of sellers.
Markets in Ontario and B.C., on the other hand, are likely to remain soft.
“In Ontario and B.C., there's too little demand chasing too much supply. And when buyers have lots of choice, you tend to see prices get negotiated down,” Sondhi explained.
Condo prices in the Greater Toronto Area (GTA) declined earlier this year, and they will likely continue to drop for the remainder of the year, Sondhi said. A recent TD Economics report forecasts GTA condo prices will fall through the rest of 2025, such that by the time the year is done, they will have dropped between 15-20% from their 2023 peak.
Bank of Canada rate cuts
So far in 2025, the Bank of Canada (BoC) has cut its lending rate twice. Each cut was a reduction of 25 basis points.
TD Economics predicts that the ongoing softness in the labour market should open the door for the BoC to cut its lending rate again this year.
A BoC rate cut could help Canada’s housing market.
“If the Bank Canada cuts its lending rate again this year, it would, at the very least, affect variable rate mortgages,” Sondhi said. “So, some segment of the market could receive some modest stimulus.”
Stronger housing market in 2026
Sondhi said he’s expecting to see stronger growth in Canadian home sales and average home prices in 2026. This growth would be possible if supported by an improving economy and reduced economic uncertainty.
“There's been a cloud of uncertainty that has contributed to the negative buying sentiment that's weighed on the housing market,” Sondhi said. “TD Economics thinks some of that uncertainty should wane in the back half of this year and dissipate even further into 2026.”
However, Sondhi said the scale of bounce-back in Canadian average home prices will likely be restrained by poor affordability in key markets like B.C. and Ontario.
Condos in the GTA, on the other hand, may become more affordable, which could help improve sales.
“Affordability in the GTA condo space has improved because we have seen declining prices since the third quarter of 2023,” Sondhi said. “So, as prices have come down, affordability has improved, which could help the condo market get off the ground a little bit more in 2026.”
So, the bottom line is that while Canada’s housing market likely won’t return to peak-pandemic levels, when homes were fetching record prices, it is expected to slowly return to a more balanced spot in the latter half of 2025 and early 2026.