The year 2024 wraps up on a positive note, with the Quebec real estate market gaining momentum in the fall, thanks to lower mortgage rates and the return of buyers. However, while the final months of the year have been favourable for property purchases, what can we expect in 2025?
If you’re considering becoming a homeowner, it’s natural to wonder whether 2025 will be the right time to make your move. After all, this is a major decision with significant financial implications in the short, medium, and long-term.
To help you make an informed decision, here are the key factors to keep in mind.
A review of the 2024 real estate market
After a slowdown in 2023, the real estate market rebounded in 2024, especially during the second half of the year.
This period was marked by a reduction in the Bank of Canada's key interest rate, which encouraged many buyers who had been waiting to re-enter the market.
Boosted by lower interest rates and renewed buyer interest, the real estate market strengthened in the fall. Following a particularly strong October, November also saw substantial activity. The Association professionnelle des courtiers immobilier du Québec (APCIQ) reported a 47% increase in sales in Montreal and a 46% increase in Quebec City in November 2024 compared to the same period in 2023.
How will the real estate market perform in 2025?
Forecasts for 2025 are shaped by various economic factors. To determine whether the upcoming year will present a good opportunity for buyers looking to purchase a first or new home, four key elements should be taken into account:
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Home prices
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Current interest rates
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Available inventory
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The ability to qualify for a mortgage
Will home prices decrease this year?
Unfortunately, for those hoping for more affordable properties, the outlook for the coming year does not suggest a decrease in prices. On the contrary, home prices are likely to keep rising across the province.
According to Proprio Direct's forecasts, the increase will be moderate, at 3%, for 2025. Royal LePage, however, anticipates a more substantial rise of 7%.
Potential price increases by region
Naturally, different regions of the province will experience varying impacts. The Quebec City market could, in fact, be the most affected by price increases, as it was in 2024.
Here’s an overview of the potential price increases forecasted by Royal LePage:
- Montreal:
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Single-family home: +7.5% to reach $750,780.
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Condo: +6% to reach $507,210.
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- Quebec City:
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Single-family home: +12% to reach $476,896.
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Condo: +7% to reach $315,222.
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- Gatineau:
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Single-family home: +7.5% to reach $593,938.
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Condo: +2.5% to reach $343,478.
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- Sherbrooke:
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Single-family home: +8% to reach $449,820.
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- Trois-Rivières:
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Single-family home: +5% to reach $400,890.
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Towards new records?
The increase in home prices could be significant, though it is not expected to match the rapid pace seen during the pandemic.
Nonetheless, some experts believe that the rise in home prices will outpace inflation. In the spring of 2024, the Canada Mortgage and Housing Corporation (CMHC) even predicted that home prices could reach the peak levels seen in 2022 as early as 2025, with the potential to set new records in 2026.
What are the forecasts for mortgage interest rates?
After several months at 5%, the highest level since the pandemic, the key interest rate finally decreased in June 2024, followed by four additional cuts in the months that followed, reaching 3.25% by the end of the year.
This is great news for buyers across the country, as they now benefit from more favourable mortgage rates for their loans. But will interest rates continue to decrease in 2025, or will we see stabilization?
According to Desjardins, the key interest rate is expected to decrease further in 2025. It could stabilize between 2.25% and 3.25%, which is considered a neutral range.
However, it's important to note that nothing is guaranteed. The pace and extent of these reductions will depend on several economic factors, including:
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The growth of the Canadian economy
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The state of the job market
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The Consumer Price Index
Will there be more properties available on the market?
Despite an increase in inventory and a slight rebound in construction starts, the number of properties available on the market will still fall short of meeting demand.
The imbalance between supply and demand is expected to persist into 2025, and likely beyond, until there is a significant shift in the construction of new homes.
While construction starts saw a slight rebound in 2024, they remain insufficient to address the growing demand. However, government initiatives, such as speeding up building permits and offering incentives for developers to construct affordable housing, could have a positive impact in the medium and long term.
In the short term, this housing shortage could result in increased competition among potential buyers, which could further push home prices upward.
Will it be harder to qualify for a mortgage?
At the beginning of 2025, new mortgage regulations will take effect, aiming to limit excessive borrowing and stabilize the market. Under this new measure, mortgage lenders will be required to cap the loan-to-value ratio of mortgages at 4.5 times the borrower’s annual income.
Because this limits the maximum amount that can be borrowed, the new regulation could make it more difficult for some households to access homeownership. However, most households should not be significantly affected, as banks already have measures in place to prevent over-indebtedness.
On the other hand, the decline in mortgage interest rates will make it easier to qualify for a loan and pass the stress test, as calculations will be based on lower rates.
Advantages of buying a property in 2025
Purchasing a property this year can offer several key advantages, including:
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Lower interest rates: This means more favourable financing terms and more affordable monthly mortgage payments compared to just a few months ago.
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A more balanced market: Despite ongoing inventory shortages and strong demand, the market has slowed compared to previous years of intense competition. This gives you more time to make informed decisions, without the pressure of multiple offers that were so common in the past.
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Potential for long-term growth: Even at a higher price, investing in real estate in 2025 remains a profitable long-term investment. You'll likely see the value of your property appreciate quickly.
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Increased stability: In a time when rental prices are high and unpredictable, homeownership allows you to stabilize your housing costs and secure a long-term place to live.
Disadvantages of buying a home in 2025
Some challenges could still make buying a home more complex this year, such as:
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Higher prices: With an increase expected in nearly all regions of Quebec, buyers will need to be prepared to pay more for a property.
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Limited availability: The low inventory of properties could force you to compromise on location, the type of home, or even the price you're willing to pay.
Is it better to pursue your home buying project or wait?
The answer to this question depends on your personal situation and financial goals.
Buying in 2025 could be a good idea if:
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You are financially ready and have an adequate down payment.
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You want to take advantage of falling mortgage rates.
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You want to avoid paying even more for the property of your dreams.
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You want to start building your equity now.
On the other hand, waiting could be more prudent if:
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You need to improve your financial situation or save for a larger down payment.
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You are uncertain about your short-term professional or family situation.
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You want to avoid facing more economic uncertainties, particularly related to inflation and the cost of living.
Are you waiting for interest rates to decrease a bit more? This may not be the best strategy, as home prices are likely to continue rising during your wait. While you might secure a lower rate, you’ll end up paying more for your home, which could offset any potential benefits.
Are you waiting patiently for home prices to decrease? Unfortunately, this doesn't seem likely soon, in fact, prices are expected to keep rising. The longer you delay your plans, the more you'll likely pay. It's better to move forward now if you can afford it.
When is the best time to buy a home in 2025?
Are you committed to purchasing your home this year? You’re probably wondering when the ideal time is to enter the market. Here are a few factors to consider to help you determine the right time for you:
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Early in 2025: The months of January and February tend to be quieter in the market. This is a good time to prepare your buying plans and start your search for your next home, as you'll face less competition.
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Spring and Fall 2025: These seasons are typically the most active, with more properties becoming available. While this could give you more options, be ready for increased competition.
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After an interest rate decrease: Keep an eye on announcements from the Bank of Canada. A rate cut could present a great opportunity to secure your mortgage under more favourable conditions.
You want to buy a property in 2025?
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