Jan 13, 2025
This is a recap summary of the embedded podcast player you’ll find at the top of this post. If you’re looking for a deeper dive into these topics, be sure to listen to the full podcast episode where I discuss these trends in greater detail, along with insights into the broader Canadian real estate market.
To help you stay connected and receive regular updates effortlessly, I invite you to subscribe to my podcast, Mortgagenomics Canada (available on Apple iTunes and Spotify). Through the podcast, you’ll gain timely insights on housing market trends, interest rates, and mortgage qualification rules—delivered straight to your favorite platform. Listen to it on your way to work, or click on the blog version of the episode you’ll find within the episode notes.
In this blog, I’ll provide housing market trends in Calgary, Vancouver, and Edmonton, the latest interest rate updates, and policy changes aimed at both first-time and repeat homebuyers.
Let’s kick off this year with clear insights and a strategic plan to help set you up for success in the housing market!
REAL ESTATE MARKETS:
As a dually licensed mortgage broker in both British Columbia and Alberta, I have a unique perspective on the real estate markets in Vancouver, Calgary, and Edmonton. Having been born and raised in Calgary before making Vancouver my home, I’ve spent significant time in both cities and have a deep understanding of the dynamics shaping these regions. With my focus on Western Canada, I’m committed to sharing the latest market updates and outlooks for Vancouver, Calgary, and Edmonton.
For more frequent and detailed insights into all three markets, I’ve recently launched Real Estate Market Update segments on my podcast, Mortgagenomics Canada. My goal for 2025 is to provide even more regular updates featuring top real estate agents from Vancouver, Calgary, and Edmonton—offering real-time, boots-on-the-ground analysis. Be sure to subscribe to the podcast so you can stay engaged with the latest trends and expert insights across these key markets.
VANCOUVER:
The Vancouver housing market has seen a modest 1.2% increase in the average residential sale price from 2023 to 2024, rising from $1,277,294 to $1,292,992. However, the number of sales transactions has decreased by 2.5%, dropping from 23,044 to 22,459. On the other hand, the total number of listings has risen by 19.3%, from 45,110 in 2023 to 53,825 in 2024.
Looking ahead to 2025, the market is expected to shift further towards a seller’s market, with average prices predicted to rise by 7% and sales likely to increase by 20%. First-time buyers and move-up buyers are expected to drive activity, particularly in the single-detached home segment. Condominiums and townhomes will continue to attract first-time buyers, especially around the $800,000 price point, while move-up buyers will target homes priced between $1.2 million and $1.5 million. Retirees are focused on downsizing, looking for single-level townhomes or larger condos in the $700,000 to $1 million range. Buyers of new construction are prioritizing locations with good amenities and outdoor space, with a growing interest in air-conditioning options due to rising summer temperatures. The introduction of a 30-year amortization will help first-time buyers, and declining interest rates are expected to boost market activity in 2025 (Source: REMAX).
CALGARY:
The average sale price in Calgary has risen by 3.7% from 2023 to 2024, increasing from $571,600 to $592,500. Sales transactions remained stable with a slight decrease of 1.54%, from 27,406 units in 2023 to 26,985 in 2024. The total number of listings increased by 9.72%, from 34,000 properties in 2023 to 37,305 in 2024.
Looking to 2025, Calgary’s housing market is expected to shift to a buyer’s market overall, although area price points will dictate more precise market conditions throughout. While mid- to high-priced homes are expected to experience balanced conditions, more affordable properties will see higher demand, creating a seller’s market. Average prices are projected to rise by ~5% in 2025, with sales expected to increase by 2%. First-time buyers will be key players, focusing on detached homes under $700,000 or condos around $350,000. Move-up buyers typically purchase detached homes or attached infills with budgets between $700,000 and $2 million, while retirees are opting for villas and larger condos. New construction is thriving, with projects mainly focused on apartments, condos, detached homes, and infills. A decrease in interest rates and the introduction of a 30-year amortization will support first-time buyers, though the region still faces a significant challenge with affordable housing supply (Source: REMAX).
EDMONTON:
The average sale price in Edmonton has increased by 7.7% from 2023 to 2024, rising from $400,833 to $431,839. Sales transactions have surged by 27.5%, from 19,799 in 2023 to 25,252 in 2024, while the total number of listings increased by 6.3%, from 31,159 to 33,109.
Looking ahead to 2025, Edmonton is expected to remain a seller’s market, with average prices projected to rise by 10% and sales likely to increase by 4%. Listings are anticipated to grow by 3%. First-time buyers will be a driving force in 2025, with single-detached homes in the $350,000 to $450,000 range seeing the most activity. Move-up buyers will target homes priced between $600,000 and $800,000, while retirees will focus on downsizing into condos and townhouses in the $150,000 to $400,000 range. Rising rental rates and 30-year amortizations will help encourage first-time buyers to enter the market, as consumer confidence remains strong. New construction in Edmonton is not keeping pace with demand, especially from homebuyers relocating from Ontario, British Columbia, and Calgary, who are seeking more affordable options (Source: REMAX).
REAL ESTATE SUMMARY:
Western Canada’s real estate markets are poised for strong growth in 2025, with potential price increases of up to 10% in certain cities and neighborhoods. Several factors are driving this optimism: pent-up demand, new price cap rule for mortgage qualification (see below), rates are 1-2% lower than last year, house price declines have pretty much stopped, and immigration is declining- BUT its not stopping…there are still 395,000 immigrants expecting to arrive in 2025, and the inflow will absolutely continue into the future, unless we suddenly commit to reversing the Canadian birth rate. With a 1.26 birth rate in Canada, immigration will likely remain a critical part of Canada’s long-term economic strategy.
INTEREST RATES:
As you may be aware, Canada’s Prime Rate has been on a downward trajectory since April 2024, dropping from 7.20% to its current level of 5.45%. This is excellent news for those holding variable-rate mortgages, and the downward trend is expected to continue throughout 2025. Economists predict that Prime Rate could decrease by an additional 0.50% to 1.50%, potentially bringing it as low as 3.95% to 4.45% by mid to late 2025.
Similarly, fixed rates are also expected to decline further, though they have already been dropping ahead of Bank of Canada announcements. It’s important to note that media coverage on Prime Rate cuts does not always reflect the sentiment in the fixed-rate market. For the past few years, fixed rates have often been reduced in advance of official Bank of Canada announcements.
Remember, fixed mortgage rates in Canada are influenced by the bond market, where government bond yields reflect global economic conditions, market sentiment, and inflation expectations. This makes fixed rates a more organic indicator of broader economic realities. In contrast, Canada’s Prime Rate is tied to the Bank of Canada’s overnight rate, which is adjusted as part of monetary policy to steer the economy toward desired outcomes, such as controlling inflation or stimulating growth. While Prime Rate reflects deliberate policy interventions, fixed rates are shaped by the natural ebb and flow of financial markets. It’s essential to distinguish between the two and avoid assuming they operate in tandem.
That said, 2025 will bring some uncertainty to interest rate forecasting. While many economists anticipate further rate decreases, Canada’s economic landscape remains complex, with challenges such as a growing affordability crisis, weak leadership, and global uncertainties. My personal outlook is that fixed rates will continue a downward trend, potentially in a zig-zag pattern, averaging out in the low 4% range, and possibly dipping to 3.99% during promotional periods. As for Prime Rate, I expect the Bank of Canada to lower it by at least another 0.75% in 2025, after which time it will likely stabilize for a couple of years.
NEW MORTGAGE RULES:
As we move into 2025, understanding the shifting landscape of mortgage qualification rules is more critical than ever for both prospective buyers and current homeowners. Over the past year, regulators and lenders have introduced key changes aimed at balancing affordability with financial stability, responding to evolving market conditions and economic uncertainties. While these adjustments are designed to ensure responsible lending, they could significantly impact borrowing power, market activity, and overall consumer confidence. In combination with the lower interest rate environment, the following mortgage qualification policies could create unintended consequences that intensify activity in certain market segments.
NEW Policy 1: Reduced Down Payment for Homes Worth up to $1.5M
The newly implemented reduced down payment policy, which lowers the minimum requirement from 20% to 5% for properties up to $1.5M, is designed to assist first-time home buyers—and by all accounts, it will likely achieve that. At the same time, it is poised to inject additional energy into the real estate market by expanding affordability for buyers with strong incomes but limited savings.
However, I believe this policy will generate more unintended consequences than anticipated. While it is framed as a measure to assist buyers, the real motivation seems to address the looming inventory of newly constructed condos, particularly in Toronto and Vancouver. In Toronto especially, a wave of condo completions in 2025 will bring many units to market that are now significantly undervalued compared to their peak purchase prices (e.g., purchased for $900,000 in 2021 but now valued at $750,000).
This policy appears to be a strategic move to prevent widespread appraisal shortfalls, which could leave many buyers underwater and unable to close on their purchases. By allowing buyers to qualify with a lower down payment, the rule eliminates the appraisal hurdle for many, mitigating potential fallout (as insured mortgages under this policy no longer require appraisals).
While this rule may help buyers secure their new condo purchases, it could also have broader impacts. Since the qualification criteria do not differentiate between buyer types, the policy could be leveraged by others to gain an advantage in the resale market. First-time buyers can use the rule for all property types, while repeat buyers are limited to new construction purchases. The ultimate effects of this policy remain to be seen, but we’ll likely get a clearer picture as the year unfolds.
NEW Policy 2: Elimination of the Stress Test for Renewals
Another noteworthy policy change is the elimination of the mortgage qualification stress test at renewal time. Traditionally, borrowers renewing their mortgages had to qualify at a rate 2% higher than their contract rate, even if they were maintaining their existing mortgage balance. Now, homeowners can shop for the best rates without the fear of failing the stress test.
While this regulatory adjustment is a step in the right direction, I find it somewhat underwhelming. Most clients I’ve worked with haven’t faced significant hurdles renewing their mortgages, so the practical impact of this change may be limited. A more meaningful improvement would be to extend this flexibility to refinancing. Unlike renewals, refinancing involves increasing the mortgage balance and extracting equity, which requires borrowers to requalify. Allowing applicants to requalify at their contract rate for refinancing would provide much-needed access to equity for those who need it most.
NEW Policy 3: The Loan-To-Income (LTI) Rule
Lastly, there’s a critical new policy that many Canadians—and even some bankers and mortgage brokers—are still unaware of. Canada’s banking regulator (OSFI) now imposes a cap on the percentage of mortgages that can exceed 4.5 times the borrower’s gross income. But here’s the crazy part. This cap varies by lender and is completely confidential.
As a result, consumers won’t know which lenders have reached their cap or which ones have room to approve higher LTI ratios. This will likely lead to confusion and frustration among mortgage seekers, as applicants might face declines with one lender only to be approved by another. As interest rates continue to fall, expect the LTI rule to gain traction and create additional hurdles for borrowers.
CONCLUSION:
As we step into 2025, declining interest rates and easing mortgage qualification rules bring a sense of optimism to Canada’s real estate market. However, new policies like the Loan-To-Income cap and the reduced down payment requirement introduce fresh complexities. These changes could spur market activity but may also rekindle affordability concerns and inflationary pressures.
For those who believe the market has reached or is near its bottom, acting sooner rather than later could be a prudent move. With the potential for prices to rebound in a declining rate environment, waiting might result in higher costs and/or tighter qualification hurdles down the line.
Wondering if now is the right time for you to make a move? Pick up the phone and start the conversation with Marko (right now!)
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