The prospect of the United States imposing 25% tariffs on Canada has sparked considerable debate. As trade policies and international alliances evolve, they are reshaping the global economy and supply chains.
Amid this uncertainty, these tariffs could have far-reaching yet indirect effects on Canada's real estate market. Let’s explore how these measures could impact the real estate sector across our vast country.
Trump's tariffs: how do they work?
Tariffs, also known as customs duties, are taxes levied on goods that are imported or exported between countries. Governments typically impose them to regulate trade, protect domestic industries, or influence global economic relations. These taxes can be applied to a broad range of products, from everyday consumer items to crucial raw materials.
Who pays the 25% customs fees?
In theory, importers are responsible for paying customs duties. However, these additional costs are typically passed on to consumers, resulting in higher prices for imported goods.
Canadian countermeasures: which imported products will be affected?
In response to the U.S. tariffs on Canadian products, the Canadian government has implemented counter-tariffs on select American goods in two phases. The first phase took effect on March 4, 2025, with a second wave scheduled for the end of March.
The second phase will target a wider range of products, including tubes and pipes, screws, stoves, aluminum foil, bricks, building materials, and various other industrial goods.
These tariffs will particularly affect Canadian industries that rely on importing these materials, potentially driving up construction costs across the country.
An era of uncertainty for the real estate market
The U.S. tariffs could have profound and far-reaching effects on the real estate industry in 2025, influencing construction costs, housing availability, property affordability, and rental market conditions.
As trade tensions and economic shifts continue to reshape the global economy, the real estate sector must navigate this uncertainty to meet the growing demands of the population. In the face of these challenges, the sector will need to adapt quickly, minimizing negative impacts and capitalizing on opportunities in this dynamic global landscape.
The impact of U.S. tariffs on Canada’s real estate industry
The impact of U.S. tariffs on real estate is multifaceted. While these tariffs are a political response to trade disputes, their effects could ripple through various facets of the real estate market, both in the short and long term.
1. Fluctuations in the prices of steel, aluminum and other construction materials
The most immediate effect of the tariffs on real estate is the sharp and sudden fluctuation in the prices of construction materials. The rising cost of imported materials such as steel, aluminum, windows, and electrical equipment makes construction projects more expensive. This increase in costs could reduce the profitability of projects for developers, leading them to scale back investments. It could also result in higher prices for new homes, which could decrease demand and disrupt the real estate market.
Some estimates suggest that a tariff hike could raise total construction costs by 4%, making homeownership even more difficult to attain, particularly for first-time buyers. As a result, consumers may turn to the existing housing market, exerting additional pressure on the prices of already-built properties.
2. Delays in construction projects
In addition to rising costs, the tariffs could also cause significant delays in construction projects. The increased expenses and slower delivery of imported materials may extend project timelines. These delays could limit the availability of new homes, further worsening the shortage of properties on the market.
3. Uncertainty regarding interest rates
The imposition of tariffs could also impact mortgage interest rates. If these tariffs drive up material costs and contribute to overall inflation, the Bank of Canada may be forced to raise interest rates to manage inflationary pressures.
This increase in rates would result in higher monthly payments for borrowers, making homeownership even more challenging. In 2025, approximately 1.2 million Canadians will need to renew their mortgages, exposing many households to the possibility of higher monthly payments.
Could there be any benefits?
In a different economic scenario, if trade tensions result in an economic slowdown, the Bank of Canada might decide to lower interest rates to stimulate the economy. This move would aim to boost consumption and investment by making loans more affordable. However, such a rate reduction could pose challenges for borrowers who take advantage of the opportunity to purchase a home. Given the volatility of the real estate market, this could backfire when rates rise again, especially for those with variable-rate loans.
4. Tightening of mortgage eligibility criteria
In response to the economic uncertainty triggered by the tariffs, lenders may choose to tighten their mortgage eligibility criteria. This could lead to stricter requirements for credit scores and down payments, reducing access to credit for a significant portion of the population.
Such tightening would make it even harder for first-time homebuyers to enter the housing market, further complicating their ability to achieve the dream of homeownership.
5. Increased maintenance costs
The increase in tariffs on imported materials could also drive up maintenance and renovation costs for existing properties. Homeowners needing repairs or renovations would face higher material costs, raising their expenses and potentially diminishing the profitability of their real estate investments.
For investors, this means reduced profit margins on real estate projects, which could discourage them from pursuing new construction or renovation ventures.
6. Rising rental marker prices
The rise in construction costs and home prices could also impact the rental market. As purchasing property becomes less affordable for many Canadians, the demand for rental properties may increase.
As a result, rents could see a significant rise in certain areas. Furthermore, with the slowdown in new housing construction, the rental supply could become even tighter, intensifying pressure on tenants and driving rental prices up in markets that are already competitive.
You want to buy or sell a house in 2025?
XpertSource.com can help you find a real estate broker. When you tell us about your project, we put you in touch with qualified resources for free. Simply fill out our form (it only takes a few minutes) and we will connect you with professionals.
