Next year looks to be a great one for the home-building industry as buyers are expected to return and prices to rise according to a 2025 market forecast by Royal LePage.

The aggregate price of homes nationwide is forecast to rise six per cent to $856,692.

“We’re expecting finally, after two-plus years, that home prices will start to react and appreciation return,” Phil Soper, CEO of Royal LePage in Toronto, told RENX Homes.

However, not all categories of the housing industry will see the same levels of activity or appreciation.

“For example, condominiums still feel some drag from the challenge that small-business investors and individual investors have felt in this space, but we do see a recovery in that market, albeit later in 2025. In the single-family detached sector, we see a pull ahead on the normal spring market,” Soper predicted.

The median price for single-family is forecast to increase to $900,833, a seven-per-cent jump, with a more modest 3.5 per cent rise in condo prices to $605,993.

Several factors to contribute to rebound

While the industry has been “treading water for the last two-plus years in the post-pandemic market correction,” Soper said, a stronger price forecast will be good news for owners as well as builders. “Going into 2025, there are a number of indicators that point to a recovery in both the volume of transactions in the Canadian housing market and as a result of the higher volume, stronger price appreciation."

Leading the way will be single family: “The star of the show in the first half of the year will definitely be the detached home,” according to Soper. “The condominium sector, particularly in our largest market in the Greater Toronto Area, does have an imbalance in supply. There’s more product available on the market than there is demand and that will work itself out in the second half of 2025.

“The other piece of that puzzle is when investors are cash-negative on a property, they will sometimes swallow and say, ‘That’s fine,’ because the underlying asset's appreciating in value. But that hasn’t been the case, particularly in Toronto where we see condominiums have actually been losing value. We see that that whole process turning around in 2025.”

The Bank of Canada will also have a say. Royal LePage predicts four, quarter-point rate cuts in 2025. The Bank's next announcement is Dec. 11, with most analysts expecting a quarter- or half-point cut.

Buyer reaction in the largest markets had been muted much of this year despite three quarter-point rate cuts, but a half-point move last month changed that.

“We saw next-to-no reaction in Toronto and Vancouver with the first three cuts to the bank rate and a strong reaction to the most recent one: the 50-basis point cut that occurred in October, when transactions leapt 44 per cent in Toronto, year-over-year, and 32 per cent in Vancouver.”

Threat of an economic downturn

If there are economic downturns, especially emanating from the U.S., where president-elect Donald Trump has threatened tariffs on Canadian goods, the central bank’s strategy might modify.

“The obvious change in policy would come if either inflation popped its head again, and tariffs can be inflationary, or probably more likely if tariffs were widespread and a recession was either triggered or the concerns of recession were serious enough that the bank had to take rates down further than they currently would like to avoid a recession and a spike in unemployment,” Soper said.

Even if American tariffs are imposed, they might not have an immediate impact on the housing market.

“It won’t happen early enough to impact the spring market of 2025 which is the most important seasonal market in the Canadian housing industry,” he said. “The start to the year could be strong regardless.”

Higher household savings levels

There's another reason more buyers might jump into the market.

“Household savings typically are closer to two per cent and they’ve been running at almost seven per cent so people have the cash for down payments — particularly first-time homebuyers — they just haven’t had the confidence to move into the market,” Soper said. “For the whole building industry, these positive indicators: lower cost of money, a willing-and-able end user, are all positive.”

Recent CMHC mortgage lending rules changes also help first-time buyers.

“They have been the cohort that has been missing," Soper said, citing stats from his company's index of national home prices which covers 66 cities. "The increase in the cap for insured mortgages . . . brings 10 new cities into play at the median home price. So, places like Milton, Ont. or Victoria, B.C., the detached home price is over a million dollars and under $1.5 million, so you’ll see people be able to acquire properties in that price range, or those geographies, they couldn’t before, that medium-level house.”

More first-time buyers should activate other sectors of the market.

“Existing homeowners came back to the market well before the first-time homebuyer. We saw a surge in listings in many parts of the country as early as the spring of 2024. The challenge was, without the first-time homebuyer, the cycle of real estate couldn’t operate effectively. In other words, current owners of entry-level homes, the demand wasn’t there from the first-time homebuyer to allow them to efficiently move up and so on,” he explained.

“That should rectify itself in 2025 and translate to better health across the market."

Long-term housing supply concerns

The long-term supply of homes remains a concern.

“We have a need for much more housing than we have in our current housing stock across the country, and that healthy level of inventory that appears to be available today will disappear quickly with a return to normal transaction levels, and we’ll be talking about the housing supply crisis again.”

Regionally Quebec City is expected to see the highest price spike at 11 per cent, with Edmonton and Regina forecast to rise nine per cent. All are highly affordable compared to the largest Canadian markets.

Toronto and Vancouver prices are to rise by five and four per cent respectively.

“The entire country is on a market recovery, and the places where we’ll see the strongest growth are where home prices are more modest.”