Why expect the real estate market to grow in 2025?

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December 30, 2024

Why expect the real estate market to grow in 2025?

As 2024 draws to a close, the outlook for the Canadian real estate market in 2025 looks promising. A number of key factors point to a dynamic increase, and even significant growth, in the residential sector. Strategic decisions such as lower interest rates and recently implemented mortgage reforms play a central role in this trend.

For buyers, sellers and investors, these developments represent unique opportunities. Let’s explore why Canada’s real estate market could be in for an exceptional year in 2025.

Time needed: 5 minutes

Lower interest rates: a lever for dynamism
Mortgage reforms: supporting accessibility
A market that remains resilient and attractive

Lower interest rates: a lever for dynamism

In December 2024, the Bank of Canada cut its key rate by 50 basis points to 3.25%. This marks the fifth consecutive cut since June, signaling a willingness to further support the economy in the face of weakening economic conditions and tame inflation.

Why is this drop crucial?

Lower borrowing costs: Lower interest rates give potential buyers access to lower-cost mortgages, increasing their purchasing power and facilitating entry into the real estate market.
Stimulating investment: Advantageous financing conditions encourage investors to acquire or develop properties, boosting the real estate market.
Boosting confidence: This series of successive declines sends a positive signal to consumers and businesses, suggesting economic stabilization and an environment conducive to real estate transactions.

According to Bank of Canada Governor Tiff Macklem, although significant cuts have been made, the central bank will now take a more gradual approach to assessing the need for further cuts, depending on economic developments.

“This drop in interest rates is not only an opportunity for first-time buyers, but also a real lever for boosting activity in the real estate market as a whole. It sends a clear message: 2025 could well be the year when many Canadians finally realize their dream of home ownership.”

Kyle Shapcott, real estate expert

Mortgage reforms: supporting accessibility

In December 2024, the Canadian government implemented major mortgage reforms aimed at making home ownership more accessible to a greater number of Canadians.

Main measures adopted :

Increase in insured mortgage limit: The maximum amount of insured loans has been increased from $1 million to $1.5 million, reflecting price trends in the real estate market, particularly in large urban areas such as Toronto and Vancouver.
Extending the amortization period to 30 years: First-time home buyers, as well as those acquiring a newly built home, can now benefit from an extended amortization period, reducing their monthly payments and making the purchase of real estate more affordable.

Expected impact on the real estate market in 2025:

Improved affordability: These reforms enable a greater number of households, particularly young people and first-time buyers, to consider buying a property, thus stimulating demand in the market.
Support for new housing construction: By facilitating access to financing for new construction, these measures encourage real estate development, helping to alleviate the housing shortage in certain regions.
Reduced financial barriers: With lower down payments and reduced monthly payments, barriers to entry into the real estate market are lowered, encouraging greater participation by potential buyers.

However, some experts are concerned about the potential impact of these measures on property prices. They fear that increased affordability will lead to increased demand, exacerbating price pressure in a context of housing shortage.

“These reforms represent a major step forward for housing affordability and solving Canada’s housing crisis.” The challenge will be to contain pressure on prices to avoid any overheating of the market which could slow demand.

Kyle Shapcott

In conclusion, the mortgage reforms introduced in 2024 should play a significant role in the dynamics of the Canadian real estate market in 2025, making homeownership more affordable for many Canadians, while posing potential challenges related to managing market demand and supply.

A uniquely resilient and attractive Canadian market

The Canadian real estate market is often referred to as an economic pillar, and the outlook for 2025 confirms this reputation. While other sectors are still feeling the effects of an uncertain global economy, Canadian real estate stands out for its resilience and continued attractiveness.

Global political instability: Canada, perceived as a haven of stability, attracts foreign investors seeking to secure their assets in a safe environment.
Montreal’s quality of life and development: With its unique charm, vibrant neighborhoods and growing opportunities, Montreal appeals to families, professionals and investors alike.
Booming infrastructure projects: REM and other large-scale projects are transforming outlying areas into attractive new hubs, boosting residential demand.
A resilient, high-performing real estate market in 2024: Despite the challenges, the market recorded significant growth in sales, volumes and prices, testifying to its ability to adapt and prosper.

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Conclusion

The Canadian real estate market enters 2025 with a solid foundation and promising prospects. With lower interest rates and mortgage reforms making home ownership more accessible, all the signs point to continued growth.

This dynamic not only benefits buyers and investors, but also reflects the Canadian market’s ability to adapt to challenges and seize opportunities. Whether you’re looking for your first property, a rental investment or planning to sell, 2025 could well be the ideal year to turn your plans into reality.

To explore the best opportunities and navigate effectively in this fast-moving market, the support of an experienced team of real estate brokers can make all the difference.

Kyle Shapcott

kyle@equipels.com

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Kyle has been an expert on the real estate market for over 10 years. He is passionate about Montreal and the city’s real estate sector and regularly shares his analysis and advice in his articles.

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