In a recent Q&A session, Oxford Economics said it expects the Canadian housing market to continue its current sales downturn, citing higher borrowing costs, weakened consumer confidence and broader economic uncertainty.
“We’ve seen very low unit sales across the country,” said Michael Davenport, a senior economist. He noted that in the most expensive markets, the estimated peak-to-low tide price correction rate is 8-10%, which is evident in Greater Toronto and the larger Vancouver area.
Davenport noted at the national level that resale activity is about 15% higher than the five-year average, while sales to new listing ratio is close to 50.
Although the resale market continues to weaken, Oxford says new buildings are developing better, although now it is also declining. The company expects that the country’s housing unit will total about 225,000 units starting in 2025, down from 245,000 in 2024 and well below its 275,000 peak in 2021. It is expected to drop to 218,000 (seasonally adjusted annual rate) in the third and fourth quarters, marking the lowest rate since the pandemic.
Meanwhile, many apartment projects launched over the past year or more are still being completed, increasing supply to the already cooled market.
“The apartment market is a mess now,” said Tony Stillo, Canadian economic director. “The price of units has to fall before they can move, which means investors may have to lose money.”
Stillo noted that affordability is still a huge obstacle. “We’re going to hear more and more reports about household funds that buyers tend to meet down payment requirements.”
Trade risks increase economic uncertainty
While housing slowdowns are a key focus, Oxford Economics also highlights macroeconomic risks associated with escalating trade tensions between Canada and the United States
U.S. exports fell sharply, with total cargo exports totaling about 10% in April, only partially rebounding in May. Combined with tariff-driven price pressures and slowing consumer spending, Oxford predicts a contraction in Canada’s GDP by the second half of 2025.
Davenport notes that while Canadian goods are threatened by 35% tariffs under the threat of constant USMCA compliance, new fixed tax rates, and may focus more on key sectors including metals and medicines, it remains a major issue.
In this context, Canadian banks have limited space for maneuver and rates have hovered where they consider neutral levels, Oxford said. “Even if they want to lower interest rates, we can see a quarter to a half point,” Stillo said.
From tariffs to defense: the key force driving the Canadian economy
In addition to domestic market pressure, Canada’s economic outlook is growing, and its international ties and global policy changes constitute the shaping.
Oxford calls the ongoing trade war a crossroads and has the potential to reach a deal by July 21 or to move to a more “custodial trade,” as Stillo said. “If no deal is reached, we are talking about a significant increase in tariffs.”
Meanwhile, the company expects more details about the Liberal government’s plan to increase defense spending in the fall, which could be part of a federal budget or fiscal update. “Up until then, our forecast assumes that this will be a deficit spending,” Stillo added.
Asked about Canadians’ interest in international travel, Stillo said the current pullback could be temporary. “We hope it’s short-lived until the USMCA review in 2026, or until the end of Trump’s term, there’s a year and a half,” he said. “In the long run, the reduction in travel will hurt the U.S. and Canada even if we turn to a more managed trade scenario.”
Considering Canada’s alternative trade options following ongoing U.S. tensions in Canada, Stillo noted that despite possible opportunities to expand trade with countries such as China and India, as well as the EU, these efforts have brought their own risks and delays. He said energy exports may play a key role here, but it is crucial that any broader diversity will take time.
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Last modified: July 22, 2025
