Hi Everyone,
We are experiencing some very interesting times in the world economy right now. Political landscapes, both at home and south of the border are quickly shaping policies that may have long lasting effects for our financial markets.
As the U.S. ramps up tariffs on imported goods, concerns are growing north of the border about the ripple effects these protectionist measures could have on Canada’s housing market. While tariffs are primarily a tool of economic policy aimed at shielding domestic industries, they often carry cross-border consequences—especially in economies as deeply interconnected as those of Canada and the United States. Imposed or threatened new tariffs on a range of products, including steel, aluminum, lumber, and other key construction materials can disrupt supply chains and increase the cost of goods on both sides of the border. For Canada, which exports a significant volume of softwood lumber and other building materials to the U.S., retaliatory tariffs—or diminished demand due to higher costs—could impact producers, potentially leading to job losses or reduced output. One of the most direct ways U.S. tariffs could influence the Canadian housing market is through the cost of construction materials. If Canadian producers shift their supply to meet U.S. demand despite tariffs, it could create shortages at home, driving up domestic prices. Alternatively, if tariffs lower demand from the U.S., Canadian producers may flood the local market with cheaper materials—though this would depend on producers’ capacity to absorb lower profit margins.
For new construction builds, this could affect the overall costs of new developments: Increased construction costs could push developers to scale back projects or delay new builds, reducing supply and putting upward pressure on home prices—especially in already-tight markets like Toronto and Vancouver.
When builders are considering a project they typically will calculate costs based on eventual sale prices coupled with the length of time it will take them to obtain approval for the project, complete construction and then market and sell the homes. With both market and price uncertainty, this is becoming more difficult for the average builder to do in order to have a concrete idea of their profit margins.
You might think this could have a positive effect on the housing market as perhaps prices may come down…however price uncertainty can deter investment in real estate development, compounding housing shortages in urban centers. When less homes are being constructed/provided on the market suddenly demand increases. When demand increases…prices follow suit.
Another consideration is the impact of tariffs on the Canadian dollar. If tariffs lead to decreased Canadian exports or investor uncertainty, the loonie may weaken. A weaker currency could make imported goods more expensive, again increasing construction costs. However, it might also make Canadian real estate more attractive to foreign buyers seeking a currency advantage, which could increase demand, especially in high-end markets. Sound familiar?
Here’s who wins in this market:
1) First Time Buyers with Strong Finances – If you have been waiting to get into the housing market, this may be the best opportunity for you since before the COVID pandemic. With ample supply and sellers competing for offers, you may have a window of time where you can make a purchase and realize equity growth in the mid term. When the economical uncertainty settles it is likely that the market may return to balanced in which case values will likely begin to increase again.
2) Downsizers/Empty Nesters – If you have been considering downsizing to a simpler lifestyle, you may also have a window of opportunity. Prices have not gone through a massive correction so you could be able to liquidate your current home at a higher price point and then re-purchase a more affordable or smaller home at a lower price point or even mortgage free. This will free up some cash equity to allow you to bank funds or retire early.
3) Re-locators – if you have considered leaving a city centre for a more rural lifestyle, consider it deeply. Rural areas often experience slower markets than city centres so, much like a downsizer, you have a chance to liquidate your hustle and bustle property and purchase a peaceful rural paradise for a much lower cost.
As always, I’m here to discuss all things real estate with you. Should you or anyone you know of have any questions about the market please feel free to reach out to me directly at 604-818-9942.
Matt