Desjardins Housing Outlook: Will Falling Rates Send Home Prices Soaring?

Falling interest rates have provided a tailwind to the Canadian housing market, and this is expected to continue through next year as rates fall further. Quebec and Alberta have been leading the resurgence in housing market activity among the big provinces, which isn’t likely to change in the near term.

But the rebound nationally so far has been more muted than previously expected, reflecting a tepid advance in sales in Canada’s most unaffordable markets, including Toronto and Vancouver. The condo market in these major centres has been especially lacklustre, with smaller cities continuing to see strong price increases. Federal policy changes aimed at supporting first‑time homebuyers should help, but only on the margins, as greater demand will ultimately push prices higher and undo some affordability gains.

Homebuilding activity is expected to be soft in 2025, as interest rates remain elevated despite ongoing cuts, residential construction costs are high and the available construction labour force is limited. Ontario and British Columbia are expected to see the greatest decline in housing starts, albeit from a relatively high level thanks to the multifamily segment.

Of course, if the Bank of Canada decides to accelerate the pace of interest rate cuts to offset the disinflationary forces of weaker‑than‑expected economic activity, this would spur a more rapid resurgence in Canada’s housing market. Only time will tell if the Bank deems it necessary to hit the gas on the Canadian economy.