The implementation of President Trump's 25% tariffs on Canadian imports has sent shockwaves through various sectors of the economy, and the real estate market is no exception. It’s important to understand how these tariffs might affect different groups of buyers and sellers. We will explore the potential impacts on downsizers, up-sizers, and first-time buyers in the GTA real estate market.
DOWNSIZERS: NAVIGATING A CHANGING MARKET
Downsizers, typically empty nesters or retirees looking to move to smaller, more manageable properties, may face both challenges and opportunities in the wake of Trump's tariffs.
Potential Price Fluctuations
The tariffs could lead to increased costs for construction materials, potentially affecting the prices of newly built condos and smaller homes that are popular among downsizers. This might result in:
- Higher prices for new, smaller properties
- Increased value of existing smaller homes and condos
For downsizers looking to sell their larger homes, this could be a double-edged sword. While the value of their current property might remain stable or even increase, the cost of their target downsized home could rise.
Market Timing Considerations
With the potential for market uncertainty, downsizers might need to be more strategic about when they decide to make their move. The Toronto Regional Real Estate Board (TRREB) forecasts that the average selling price of all home types in 2025 will reach $1.14 million, with a moderate 2.6% growth compared to 2024. This moderate growth could provide a stable environment for downsizers to make their move, but they should be prepared for potential market fluctuations.
Investment Opportunities
For downsizers with additional capital from the sale of their larger homes, the current market conditions could present investment opportunities. With a significant increase in listings, particularly in the condo market, downsizers might find attractive options for purchasing income properties alongside their primary residence.
Recommendations for Downsizers
- Consider selling sooner rather than later if planning to downsize, as the market may face uncertainties in the coming months.
- Explore newly built properties that may have locked in pre-tariff material costs.
- Be prepared for potentially higher prices in the condo and smaller home market.
- Consider the rental market as an alternative if purchase prices become prohibitive.
UP-SIZERS: BALANCING OPPORTUNITIES AND CHALLENGES
Families or individuals looking to move to larger homes may find themselves in a complex situation as they navigate the post-tariff real estate landscape.
Selling in a Buyer's Market
The GTA has seen a significant increase in listings, with active listings up 70% yearly compared to January 2024. This surge in inventory could create favorable conditions for up-sizers looking to sell their current properties. However, they may need to be prepared for:
- Longer selling times as buyers have more options
- Potential pressure on selling prices due to increased competition
Buying in an Uncertain Market
While up-sizers may benefit from a wider selection of properties to choose from, they should also be aware of potential challenges:
- Higher prices for newly constructed homes due to increased material costs
- Possible appreciation of resale properties as new construction slows down
- Uncertainty in mortgage rates, which could affect affordability
Strategies for Up-sizers
- Consider timing the sale of your current property and the purchase of your new home carefully to take advantage of market conditions.
- Explore older properties that may not be as affected by rising construction costs.
- Be prepared to act quickly on desirable properties, as increased inventory may lead to more competition among buyers.
FIRST-TIME BUYERS: NAVIGATING AFFORDABILITY CHALLENGES
First-time buyers may face the most significant challenges in the post-tariff real estate market, as affordability issues could be exacerbated.
Impact on Affordability
The implementation of tariffs could lead to:
- Higher prices for newly constructed homes, including condos popular among first-time buyers
- Potential increases in resale home prices as supply of new builds diminishes
- Decreased overall affordability in an already challenging market
Market Entry Opportunities
Despite these challenges, first-time buyers might find some silver linings:
- Increased inventory, particularly in the condo market, providing more options
- Potential for price negotiations in a market with more listings than buyers
- Possible government interventions or incentives to support first-time buyers in light of market challenges
Recommendations for First-Time Buyers
- Consider expanding search criteria to include a wider range of properties and locations.
- Be prepared for potentially higher down payments or mortgage costs.
- Explore alternative financing options or co-ownership arrangements.
- Stay informed about any government programs or incentives that may arise to support first-time buyers.
GENERAL MARKET CONSIDERATIONS
Regardless of which group buyers and sellers belong to, there are several overarching factors to consider in the post-tariff real estate landscape:
Economic Impact
The tariffs could lead to job losses and reduced consumer spending7, potentially affecting overall demand in the real estate market. This might result in:
- Fewer home sales, discouraging new construction projects
- A potential slowdown in building, leading to less housing inventory
- Long-term pressure on home prices, particularly in high-demand areas
Interest Rates and Mortgages
While the tariffs themselves don't directly affect interest rates, their economic impact could influence the Bank of Canada's decisions. TRREB forecasts suggest that interest rates may decline to between 2% and 2.75% by late 20258, which could help boost demand as borrowing costs become more manageable.
Foreign Investment
The uncertainties introduced by Trump's 25% tariff could dampen enthusiasm among foreign investors, potentially reducing competition for local buyers but also decreasing overall market activity.
Conclusion
The implementation of Trump's tariffs presents a complex and evolving situation for the GTA real estate market. While downsizers may find opportunities amidst the challenges, up-sizers will need to navigate carefully, and first-time buyers may face increased affordability hurdles. The coming months will be critical in determining the long-term impact of these tariffs on the GTA real estate market.
It’s important to keep in mind that every real estate transaction is unique, and while these general trends are important to consider, individual circumstances will always play a significant role in decision-making. As we move forward in this new economic landscape, adaptability and informed decision-making will be key for all participants in the GTA real estate market.