In a recent Q&A session, Oxford Economics said it expects the Canadian housing market to continue its current sales slump into next year, citing higher borrowing costs, weakening consumer confidence, and broader economic uncertainty.
“We’ve seen some very low levels of unit sales across the country,” said Senior Economist Michael Davenport, who pointed to an estimated 8–10% peak-to-trough price correction in the most expensive markets, with notable declines already evident in both the Greater Toronto and Greater Vancouver areas.
On a national level, Davenport noted that resale activity is roughly 15% below the five-year average, with the sales-to-new-listings ratio holding near 50. That’s right at the threshold of a balanced market, but a significant step down from pandemic-era highs.
While the resale market continues to weaken, Oxford says new construction has held up somewhat better, though it too is now trending downward. The firm expects national housing starts to total around 225,000 units in 2025, down from 245,000 in 2024 and well below the 2021 peak of 275,000. Quarterly starts are forecast to fall to 218,000 (seasonally adjusted annual rate) in both Q3 and Q4—marking the lowest pace since the early pandemic.
Meanwhile, many condo projects launched over the past year or more are still completing, adding further supply to an already cooling market.
“The condo market right now is a mess,” said Tony Stillo, Director, Canada Economics. “Prices of units have to fall in order to move, and that means investors may have to take a loss.”
Affordability, too, remains a huge hurdle, notes Stillo. “We’re hearing more and more reports of buyers leaning on family funds to meet down payment requirements.”
Trade risks add to mounting economic uncertainty
While the housing slowdown is a key focal point, Oxford Economics also emphasized the mounting macroeconomic risks tied to escalating trade tensions between Canada and the U.S.
Exports to the U.S. have dropped significantly, with total goods exports falling roughly 10% month-over-month in April, and only partially rebounding in May. Combined with tariff-driven price pressures and a slowdown in consumer spending, Oxford is forecasting a contraction in Canadian GDP through the second half of 2025.
Davenport noted that while Canadian goods are receiving somewhat of a reprieve due to continued USMCA compliance, the threat of a new tariff flat rate of 35%, with potentially more on key sectors including metals and pharmaceuticals, remains a major concern.
Against this backdrop, Oxford says the Bank of Canada has limited room to manoeuvre, with rates already hovering near what it considers the neutral level. “Even if they were to cut rates, a quarter point to half point would be as much as we would see,” Stillo said.
From tariffs to defence: Key forces driving Canada’s economy
Beyond domestic market pressures, Canada’s economic outlook is increasingly shaped by its international ties and global policy shifts.
Oxford described the ongoing trade war as being at a crossroads, with the potential for a deal by July 21 or a shift toward more “managed trade,” as Stillo put it. “If a deal isn’t reached, we’re talking about quite a significant hike in tariffs.”
Meanwhile, the firm expects more details on the Liberal government’s plan to increase defence spending to emerge in the fall, likely as part of a federal budget or fiscal update. “Until then, our forecast assumes this will be deficit spending,” Stillo added.
Asked about Canadians’ appetite for international travel, Stillo said the current pullback is likely temporary. “We’re hoping that this is short-lived—either a year and a half until the USMCA review in 2026, or perhaps until the end of Trump’s term,” he said. “Long term, this decrease in travel would hurt the U.S. as well as Canada, even if we move to a more managed trade scenario.”
Considering Canada’s alternative trade options in the wake of continued U.S. tensions, Stillo noted that while there may be opportunities to expand trade with countries like China and India, as well as the EU, those efforts come with their own risks and delays. Energy exports could play a key role here, but crucially any broader diversification will take time, he said.
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Last modified: July 22, 2025
