With U.S. President Donald Trump imposing 25% tariffs on Canadian goods (and 10% on energy) starting February 4, 2025, Canada’s real estate industry is set to feel the impact. From rising construction costs to higher mortgage rates, the tariffs could drive up home prices, slow down new developments, and create uncertainty in the housing market.

1. Construction Costs Will Surge

The real estate sector relies heavily on U.S. imports for construction materials, including:

• Lumber – Used in framing homes, decking, and cabinetry.

• Steel and Aluminum – Used in high-rise buildings, commercial properties, and infrastructure.

• Appliances – Many kitchen and household appliances are sourced from the U.S.

• Insulation, Roofing, and Plumbing Materials – Essential items that will now be more expensive due to tariffs.

With tariffs raising the cost of these materials, developers will pass the increased costs onto homebuyers, making housing even less affordable.

According to industry analysts, tariffs could add $15,000–$30,000 to the cost of building a single-family home. This could reduce new home construction and worsen Canada’s housing supply crisis.

2. Higher Mortgage Rates Could Slow the Market

Trump’s tariffs could also push up mortgage rates, affecting both buyers and sellers.

• Inflationary Pressures: Higher costs for goods and services will increase inflation, which could force the Bank of Canada (BoC) to raise interest rates.

• Variable-Rate Mortgages Will Become More Expensive: Borrowers with variable-rate mortgages will see immediate increases in their monthly payments if the BoC hikes rates.

• Fixed-Rate Mortgages Could Also Rise: Fixed rates are tied to bond yields, which tend to rise in uncertain economic conditions.

Higher borrowing costs will reduce affordability, making it harder for Canadians to qualify for mortgages and purchase homes. This could lead to a slowdown in home sales and even price corrections in some markets.

3. Slowdown in New Real Estate Developments

With higher material costs, rising labor costs, and uncertain buyer demand, many real estate developers may delay or cancel new projects.

• Condo and High-Rise Developments at Risk: Developers building high-density projects rely on steel, aluminum, and imported appliances, all of which will be affected by tariffs.

• Fewer Rental Units: Many purpose-built rental projects may be put on hold, worsening Canada’s rental crisis.

• Commercial  Real Estate Could Also Suffer: Higher costs for constructing and maintaining commercial properties could slow new office and retail developments.

4. Housing Supply Could Tighten, Pushing Prices Even Higher

Canada is already facing a housing supply crisis, with not enough homes being built to meet demand.

• If developers pull back on projects, the lack of supply could keep prices high.

• First-time homebuyers could be priced out, forced to rent instead of buy.

• Rising rents could push more people into the condo market, driving up condo prices.

While some expected a housing market correction, tariffs could actually prevent home prices from falling due to supply shortages.

5. U.S. Real Estate Investors Could Take Advantage

Ironically, American real estate investors may benefit from Trump’s tariffs.

• Weaker Canadian Dollar: The economic uncertainty and trade war could push the Canadian dollar lower, making Canadian  real estate cheaper for U.S. investors.

• Commercial Investment Opportunities: Some U.S. firms may see Canadian commercial real estate as a bargain if prices correct due to tariffs and higher mortgage rates.

However, Canadian investors looking to buy U.S. properties may face challenges due to a weaker currency and rising interest rates.

6. The Energy Sector’s Impact on Real Estate

With Trump imposing a 10% tariff on Canadian oil, Canada’s energy sector could take a hit—and that could affect real estate markets in oil-dependent regions like Alberta, Saskatchewan, and Newfoundland & Labrador.

• Lower oil demand could lead to job losses, reducing demand for housing in these provinces.

• Real estate markets in Calgary and Edmonton may cool, as fewer energy sector jobs mean fewer homebuyers.

• On the other hand, energy-rich provinces could push for export tariffs on U.S. oil, raising energy prices in the U.S.

Conclusion: A Market in Flux

Trump’s tariffs are set to disrupt the Canadian real estate market in multiple ways.

• Construction costs will rise, making new homes more expensive.

• Mortgage rates may increase, making it harder for buyers to afford homes.

• Housing supply may tighten, keeping prices high.

• Developers may delay projects, worsening affordability.

• U.S. investors may swoop in if the Canadian dollar weakens.

While Canada is preparing countermeasures, the real estate market must brace for a period of uncertainty and higher costs. Homebuyers, sellers, and investors will need to adapt to a shifting economic landscape as tariffs take effect.

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