The ongoing threat of tariffs on Canadian goods by the Trump administration have raised concerns across many industries and we cannot naively believe that the real estate market will escape unharmed. When economic uncertainty looms, consumer confidence takes a hit, which can directly impact home buying and selling decisions. So, what might these tariffs mean for the Canadian economy, and more specifically, for the real estate market in 2025? Let’s take a closer look.

Higher Costs and Inflation: What It Means for Consumers

If tariffs are imposed on Canadian-manufactured goods entering the U.S. and depending on how Canada chooses to react, industries like automotive, steel, aluminum, various raw materials among other goods could see price increases on both sides of the border. This in turn, may lead to higher costs for businesses and eventually, consumers. Construction materials and building products some of which come from the U.S., already expensive given a weaker Canadian dollar, could see another price surge similar to what we experienced during the COVID 19 pandemic.  This could be bad news for developers and homeowners alike.

For Canadians, this could mean:

  • Higher prices for goods and services as companies are forced to pass on increased costs.
  • A slowdown in new housing developments due to rising construction costs.
  • While mortgage rates have in fact been trending down this might change if the inflation rate rises as the result of tariffs and do not come down to meet the Bank of Canada’s inflation rate targets.
  • Lastly we cannot rule out a possible recession for both countries and perhaps globally if the imposed tariffs become a long and drawn out battle where nobody wins.  Canada is not alone in this tariff rift with the U.S.

Economic Uncertainty and Consumer Confidence

Tariffs tend to create economic uncertainty, and when people feel unsure about the future, their jobs are at risk and or their buying power is reduced, they often delay big financial decision like buying a new car, taking expensive trips and yes buying or selling a home or second property such as a cottage or recreational condominium. If businesses face higher production costs or job cuts due to reduced demand, we as consumers may have no choice but to tighten own budgets and reduce spending, focusing more on daily essentials.

Looking forward, key concerns might include:

  • Potential job losses in affected industries, impacting affordability for some homeowners.
  • Research conduced by the Bank of Canada shows that 60% of Canadians will be facing mortgage renewals over the next two years.  Clearly these renewals will be at significantly higher rates that what buyers encountered in 2020/2021.
  • A cooling effect on consumer spending, often leads to a softer real estate market and this is particularly true in the Southern Georgian Bay area where many properties be it a home, cottage or condominium are secondary homes which are often the first ones people are forced or choose to give up when times get tough.
  • In lieu of moving some homeowners may choose to renovate, add on to or upgrade their current home versus selling and buying something else.  That new pool in the backyard is much cheaper than buying a cottage.  From a personal standpoint my wife and I are undertaking a kitchen renovation.

Impact on Key Sectors and Real Estate Trends

Certain industries will feel the pinch more than others, and their struggles could ripple into the real estate market:

  • Automotive & Manufacturing: Canada’s auto sector, heavily reliant on exports to the U.S., may experience reduced demand, leading to job losses in cities with strong manufacturing hubs. A recent story in CBC News states that automotive related manufacturing could grind to a halt in less than two weeks if tariffs are imposed.
  • Energy & Resources: Canada exports large amounts of oil, gas, and minerals to the U.S. Tariffs could slow demand, affecting employment in these sectors and, in turn, the housing market in resource-rich regions, Alberta being one.
  • Agriculture: If Canada imposes retaliatory tariffs, U.S. farmers could see reduced sales to Canada.  At the very least with a weaker Canadian dollar, we can no doubt expect higher prices for fruits and vegetables through the balance of this winter and spring, months when we depend heavily on imported agricultural products.

Could Canada Seek New Trade Partners?

With tariffs making U.S. trade less favorable, Canada may accelerate efforts to strengthen relationships with Europe, Asia, and Latin America. A diversification of trade partners could help stabilize certain industries, but such transitions take time, and the short-term impact on the economy could still be felt.

What Should Home Buyers and Sellers Do?

Most people acknowledge that real estate is a cyclical business yet when done using sound fac t based decisions real can be a sound investment even in volatile times.  In the latter half of 2022 and throughout 2023/2024, the Canadian housing market overall have been shifting to a more balanced state, levelling the playing field for both Sellers and Buyers.  If you’re considering buying or selling real estate in 2025, here are a few things to keep in mind:

  • Monitor Interest Rates: If inflation rises, borrowing costs may increase. Locking in a lower rate sooner rather than later might be wise.
  • Consider Market Timing: Economic uncertainty can slow down home sales. If you’re selling, pricing competitively will be crucial.  At the present time, the inventory of properties listed for sale on the MLS® System in the Southern Georgian Bay area is at the highest level we have seen since 2015.
  • Stay Informed: Keep an eye on how tariffs evolve and their impact on job markets and consumer confidence.

Final Thoughts

While no one has a crystal ball, it’s clear that proposed tariffs could introduce economic challenges that may filter down to the real estate market.  The possibility of these tariffs with the U.S. may very well bring a “sea of change” that none of us were expecting.

Whether you’re a Buyer, Seller, or investor, staying informed and making strategic decisions will be key in navigating the uncertainties ahead.  As real estate professional it is of the utmost importance that we stay abreast of the real estate market in general as well as other economic factors that can impact consumer’s decision making.

If you have any questions about how economic factors might impact your real estate plans, or for a detailed analysis of the dynamic in your particular area or property type, please feel free to Contact Me, I am always happy to provide a no-obligation consultation pertai9ning to your needs and or objectives.

NOTE: The author is a Broker, Market Value Appraiser-Residential with Sotheby’s International Realty Canada and a Past President (2008) of the One Point Association of REALTORS®.