Stressed and sidelined homebuyers start to strain Canada economy

Canadian housing markets tanked in March as the trade battles heated up. (Courtesy: Bloomberg)

This spring was widely expected to be when the Canadian housing market finally perked up after nearly three years of weak sales. But then came US President Donald Trump’s tariff demands.

Canadian housing markets tanked in March as the trade battles heated up. Nationwide, sales slumped about 9.3% from a year earlier, the lowest for the month since 2009, according to the Canadian Real Estate Association. Transactions plunged nearly 17% in Calgary and 24% in the Toronto area. And in Vancouver, sales tumbled 13%.

“In short order we’ve gone from a slam dunk rebound year to treading water at best,” said Shaun Cathcart, CREA’s senior economist.

Eric Struk, a 23-year-old YouTube travel blogger in Toronto, said Trump’s tariff blitz has now caused him to delay his hunt for a two-bedroom condo he had been thinking about for the past six months.

With advertising revenue from his videos already dropping, the extra C$1,600 ($1,150) a month he’d have to pay on a mortgage over what he currently pays in rent has grown more unappealing. And though he already has the down payment he’d need, he fears the economy could get worse, and any property bought today might just drop in value tomorrow.

“It’s not even just the stress of potentially getting a mortgage, it’s the stress of the uncertainty,” Struk said. “Who knows what’s going to happen? Especially with Trump.”

The back-and-forth on tariffs has already started to have a psychological effect on the Canadian economy. In March, employment fell for the first time in eight months and a measure of small business confidence slumped to the lowest in 25 years. The housing market has been among the areas hit first and hardest.

“Consumer confidence is really falling off in Canada,” said Robert Kavcic, an economist with Bank of Montreal. “This whole trade war is just making me more and more confident that we’re in this long period of stagnation for housing.”

There are signs that the chill in the housing market is set to continue. In January, the Canadian real estate group estimated that sales would increase 8.6% this year. Now, it’s expecting a 0.02% decline for 2025.

Daniel Foch, a broker at online real estate agency Valery.ca, says he’s had a dozen buyers tell him in the past month that they were putting their search on hold until they felt more confident about the economy.

“People are not feeling optimistic — they’re feeling pretty scared, to be honest,” he said. “They might just lose a job and have a hard time paying a mortgage. And that’s why they’re reluctant to make any large investments because they don’t have the certainty.”

The residential real estate market is often a powerful engine of broader economic growth. A home purchase can fuel more spending as owners outfit their new abodes with everything from furniture to electronics. Now, the hits to two major growth engines — exports accounted for roughly 30% of Canada’s economy last year and real estate activity was 13% — could spell trouble.

“People are kind of on the sidelines right now,” said Mike Moffatt, an economist who focuses on the housing market at Western University’s Ivey Business School. “I do think general concern about the economy because of the trade war is causing people to take kind of a wait-and-see attitude.”

In some ways, conditions are still more enticing than they were in recent years. Home prices are down nearly 16% from three years ago, inventories are building and borrowing costs are at the lowest in nearly three years. But the mounting uncertainty threatens to overpower some of those benefits.

“It doesn’t matter that rates are dropping if you think you’re going to be out of a job,” said Adil Dinani, a real estate broker in Vancouver. “You’re not going to buy real estate.”

Right before the US election, 46% of Canadians surveyed said they expected real estate values in their neighborhood would increase in the next six months, with only 9% projecting a decrease, according to weekly polling by Nanos Research. Now, only 34% expect an increase and 17% expect prices to fall.

“The market is extremely bad right now,” said Brooke Hicks, a real estate broker in the city of Hamilton, a market outside Toronto where steel manufacturers are a major employer. “It’s almost weird being an agent because it’s so slow.”