Canada and the US have officially entered into a trade war, with tariffs taking effect on Tuesday, March 4. While the long-term implications are still unfolding, it’s clear that both short term and potential long-term economic consequences will need to be carefully navigated.
A chain conflict of the scale introduces significant economic uncertainty, with ripple effects across various industries, including real estate. Higher tariffs on goods and materials are expected to drive up construction and renovation costs, disrupt supply chains, and potentially slow economic growth. This could wait on consumer and investor confidence, leading to more cautious spending and investment decisions. The full impact on the housing market will depend on the duration and severity of the trade war, but factors such as rising construction costs, shifts in interest rates, and changing market demand could all influence housing prices, inventory levels, and mortgage rates in both the short and long-term.
Despite broader economic factors influencing the market, the Greater Toronto Area's real estate market demonstrated notable growth in February. This growth is highlighted by a 4.1% increase in prices, bringing the average sales price to $1,084,547 across the region– an increase of $43,553. Inventory rose 13.8% month-over-month and 75% year over a year, reaching 19,536 active listings. This mirrors the peak inventory levels of 2023 while surpassing totals seen in 2022, 2021, and 2020. Sales activity increased by 4.9% resulting in 4037 total transactions. However, both inventory and sales remain far from historical February norms. Sales are down 42% compared to the 10-year average, while inventory is an astonishing 93% above its historical average, highlighting a significant shift in market dynamics.
“On top of lingering affordability concerns, homebuyers have arguably become less confident in the economy. Uncertainty about trade relationships with the United States has likely prompted some households to take a wait-and-see attitude towards buying a home. If trade in certainty is alleviated and Boria borrowing costs continue to trend lower, we could see how much stronger home sales activity in the second half of the year” said TRREEB chief market analyst, Jason Mercer.
While sales activity has improved, rising inventory levels continue to shape market conditions across the GTA. Buyers are seeing more selection across all housing types, which is helping to moderate price growth in some segments. As the spring market approaches, further clarity on interest rate policy and economic conditions will be key factors in determining whether demand can keep pace with the growing supply.