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The CREA points to the interest of 25 to 35 year olds, who are more likely to be first-time buyers
Published on January 15, 2025 • 3 minutes reading time
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CREA forecasts an 8.6 percent increase in transactions across all Canadian MLS systems compared to 2024. Photo by Daniel Acker/Bloomberg
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With interest rates expected to bottom this year, the Canadian Real Estate Association (CREA) expects demand from prospective buyers to increase Homebuyers who have been waiting in hopes of getting a better deal.
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“Our big assumption is that there is record-breaking demand,” Shaun Cathcart, senior economist at CREA and director of real estate data and market analysis, said in Wednesday’s press conference.
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CREA forecasts an 8.6 percent increase in transactions across all Canadian MLS systems compared to 2024.
Cathcart pointed to population growth and the fact that the largest demographic cohort in Canada currently is people aged 25 to 35, who are more likely to be homebuyers for the first time.
“The longer (buyers) wait, the greater the risk that we … will have demand in two or three years that becomes apparent in three or four months.”
How the provinces are doing
Cathcart noted that Canadian real estate has been in a seller's market for some time as the shortage of housing inventory in the country has not changed.
“We went into hibernation and sat in this seller’s market area the whole time,” he said. “If you expect that to change overnight, it won’t because real estate cycles are long.”
Cathcart expects it won't take much for buyers to come off the sidelines, but said CREA doesn't expect a return to COVID-19-era levels of activity because interest rates won't be as low and the Prices are still significantly higher than before the pandemic.
In British Columbia and Ontario, where there are already large inventories and relatively high prices, he expects a stronger sales recovery but not much price growth unless buyers start pouring in and competition increases.
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However, in the Prairies, where inventories are at their lowest level in 20 years and sales are at a record high, CREA does not expect much change other than price growth. According to Cathcart, there is scope for sales and price growth in the eastern provinces because there is more housing available there.
CREA predicted the national average home price will reach $722,000 in 2025, up 4.7 percent from last year.
Cathcart noted that a key caveat that could hinder sales growth is whether Canada enters a trade war with the United States.
This could have serious economic consequences, including potential job losses, making it harder for people to pay their mortgages and leading to more uncertainty, which Cathcart describes as “a huge killer in the property market”.
Outlook on the housing stock
According to the Canada Mortgage and Housing Corporation, Canada is still 3.5 million housing units short of filling the supply gap, while the Parliamentary Budget Officer puts that number at 1.3 million.
Cathcart said the Conservatives' commitment to scrapping GST on new homes sold for under $1 million could certainly help move the market, but declined to comment on whether it would could cut other housing programs if they win the next federal election.
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“Twenty years ago we were experiencing a construction boom in Canada. We built a lot of homes for a long time, and more than half of them were traditional single-family homes,” Cathcart said. “The single-family home is now effectively on the endangered species list in Canada.”
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Cathcart said there has instead been a huge explosion in dedicated rental housing that meets the needs of smaller households but doesn't provide enough space for growing families.
“I think the discussion about the missing middle is a big issue,” he said, stressing that more off-site construction and new technologies are needed to spur new construction.
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