MACLEANS Magazine's 12 Housing Predictions for 2025
At the end of each year, I like to offer predictions for the year ahead and share them with readers of the Vancouver Sun and this blog. Today, I came across12 Housing Predictions offered by MACLEANS Magazine. While some are truly predictions, others, including "BC will tax house flippers" are already known facts. But I will be interested to see which come true a year from now. Personally, I think all will turn out to be correct!
THE YEAR AHEAD 2025 - Ten Housing Predictions for 2025
Politicians will spar over how to tackle the housing crisis. Falling interest rates will draw young people into the real estate market. And a rude awakening is coming for homeowners renewing mortgages.
December 30, 2024
1. Toronto’s Condo Market Will Plummet
After a few years of stagnant pricing, the Toronto condo market is poised for a plunge. In the first half of 2024, sales of newly built condos fell by 57 per cent year over year—the biggest slowdown since 1997—largely due to high interest rates. The number of condo listings is now much higher than recent averages, and sales remain low. TD says prices will keep declining, then recover modestly by year’s end. Then we may face the opposite problem: since the downward trend has spooked condo investors, who account for 70 per cent of pre-construction sales, condo starts have also dropped dramatically. In the long run, that could mean a condo shortage, driving prices up again.
2. B.C. Will Tax House Flippers
Bad news for West Coast real estate investors: on January 1, British Columbia will implement a flipping tax aimed at curbing short-term investments and boosting the province’s minuscule vacancy rates. The first of its kind in Canada, the tax will apply to those selling property they’ve owned for less than 730 days, with some exceptions for circumstances like job relocations, deaths and divorces. Sellers who’ve owned their homes for 365 days or less will be taxed at 20 per cent of income on the sale, with the rate gradually decreasing to zero by the two-year mark. The rule is in addition to the federal flipping tax, introduced in 2022, which makes the capital gains from the sale of a home taxable as business income.
3. Interest Rates Will Keep Dropping
The Bank of Canada has finally tamed the beast of inflation—but the national GDP outlook looks less than rosy. As a result, the BoC will keep chopping interest rates through 2025, likely at a similar clip as in 2024. As rates decrease, more buyers will pour into the market, fuelling more competition. Softened lending rules will also heat up the market. The government has raised borrowing caps for mortgages secured with a down payment of less than 20 per cent from $1 million to $1.5 million. It also extended the maximum amortization from 25 to 30 years for some mortgages. The changes will make borrowing accessible to more buyers—many of whom will start house-hunting in 2025.
4. U.S. Firms Will Pour Billions into Canadian Real Estate
What we call a runaway housing market, U.S. real estate firms call an opportunity. Soaring prices, skyrocketing rents and a growing population that’s unable to afford either have created massive demand for purpose-built rentals. Blackstone, the largest private-equity firm in the world, bought Canadian rental housing owner Tricon for US$3.5 billion in May. Meanwhile, Texas-based developer Hines LLP is planning to invest up to $2 billion in land for large-scale, six- to eight-storey apartment towers in cities like Toronto, Vancouver, Calgary, and Montreal. It’s also interested in reviving projects that have been stalled in the past few years by high interest rates and construction costs. It’s a good time to do business with Canada: the governing Liberals cut the five per cent tax on new rental builds and now offer cheaper financing to builders who will try to help dig us out of our own mess.
5. Labour Shortages Will Cause Construction Delays
The next decade will be a challenge for Canada’s battered construction industry. Between now and 2033, we’ll lose 263,000 construction workers to retirement. That was predictable. Making things worse: only about two per cent of Canada’s newcomers over the past decade have skilled-trade qualifications. Domestically, young Canadians are also increasingly choosing white-collar careers over blue-collar ones. All of this will put the brakes on Canada’s ambitious goal of building 3.9 million homes nationwide by 2031.
6. First Nations Will Be the Big New Developers
In 2025, Indigenous communities nationwide will be leading the charge on housing. The country’s most impressive project is Sen̓áḵw, a cluster of 11 skyscrapers in Vancouver with 6,000 residential units, developed on land belonging to the Squamish Nation. Its first three towers will be done in 2025. The Attainable Housing Initiative, a B.C. government project on Indigenous land, will deliver 2,600 homes with 40 per cent subsidies starting in the spring. And, on the Prairies, the Southern Chiefs’ Organization, representing 33 Anishinaabe and Dakota nations, will develop a residential tower in the middle of downtown Winnipeg.
7. More Millennials and Gen Zs Will Buy Homes
Thanks to declining interest rates, rising wages and, to a lesser extent, the new option of completing an entire mortgage application online, far more millennials and Gen Zs will eye homeownership than in recent years. A nationwide Scotiabank poll revealed that more than half of non-homeowning Canadians aged 18 to 34 plan to buy a home at some point in the next five years. That’s promising news: according to the same Scotiabank poll, only 26 per cent of 18-to-34-year-olds own a home today, compared to 47 per cent in 2021, and 35 per cent live with their families. In 2025, they’ll become bigger players in a hotter housing market.
8. A Wave of Mortgage Defaults Is Coming
In 2025, more than a million households will face mortgage renewals at elevated interest rates. The banks are ready for it, having already set aside more than $4.5 billion in provisions for credit losses. The fallout from broken mortgages isn’t just bad news for homeowners, but for the economy at large. Canadian households are already among the most indebted in the world and, as defaults rise, banks may need to reserve more capital, triggering a credit crunch and making borrowing harder.
9. Edmonton Will Implement Automated Permits
Edmonton is set to become Canada’s first municipality to use AI for building-permit approvals. In 2025, it will roll out its Auto Review program, allowing builders to apply for permits for detached and semi-detached homes online and receive approvals the same day. This initiative aims to boost Edmonton’s construction industry, which has struggled to keep up with the city’s population boom—up 12 per cent to 1.1 million over the last five years.
10. Poilievre Will Eliminate GST for New Homes
If his party forms a government, Conservative Leader Pierre Poilievre plans to one-up the Liberals’ tax cut for rental builds, slashing GST for all newly built homes under $1 million. Housing wonks agree that the plan will jump-start homebuilding. But there’s a catch: to pay for it, Poilievre will eliminate the Liberals’ Housing Accelerator Fund and the Canada Housing Infrastructure Fund. Those efforts are intended to help cities fund infrastructure improvements, in exchange for loosening zoning rules. In 2024, they resulted in a wave of density-boosting zoning reforms across the country.