The recent imposition of a 25% tariff on Canada lumber by the United States has sparked widespread concerns within Canada’s housing industry. Many experts have labeled the move as “unwarranted and reckless,” citing its potential to increase construction costs, impact housing affordability, and disrupt market dynamics.

Tariffs Are Impacting the Canadian Housing Market

Rising Construction Costs

Lumber is a crucial material in residential construction, and the newly imposed tariffs are expected to drive up costs significantly. According to the National Association of Home Builders (NAHB), such tariffs typically increase building expenses, leading to higher home prices and discouraging new developments. In Canada, where affordability is already a pressing concern, this could put additional pressure on homebuyers and developers alike.

Housing Affordability at Risk and Challenges for Homebuyers

With the increase in construction costs, homes are becoming more expensive to build. This cost is ultimately passed on to buyers, making housing affordability an even bigger challenge. First-time buyers, in particular, may find it more difficult to enter the market, as mortgage rates and home prices continue to climb. The tariffs further aggravate an already strained market, where demand for affordable housing is high but supply remains limited.

Current Real Estate Trends in Canada

Canadian Housing Market Resilience Amid Economic Challenges

Despite economic challenges, Canada’s real estate market has shown resilience. As of early 2025, the national average home price stood at $670,064, reflecting a 1.6% year-over-year increase. Sales activity has also seen a 3.9% rise compared to the previous year. However, with rising construction costs due to tariffs, industry experts anticipate a potential slowdown in new housing developments, making it even harder for first-time buyers to enter the market.

Regional Real Estate Trends: How Different Provinces Are Affected

The effects of the tariffs vary across provinces. While urban centers like Toronto and Vancouver continue to see rising prices due to high demand, smaller markets may face stagnation. Rural and suburban areas, which rely heavily on new construction, are expected to be hit the hardest as developers struggle with higher costs.

Future Market Outlook in Canada

Predictions for Home Prices and Sales

The Canada Mortgage and Housing Corporation (CMHC) predicts that home prices will continue to grow in 2025, driven by increased demand and limited housing supply. Re/Max also forecasts a 5% rise in average residential prices across most Canadian regions. However, these projections could be altered if tariffs significantly impact the cost of new housing, pushing affordability further out of reach for many Canadians.

Potential Government Interventions and Policy Changes in Canada

There is growing pressure on the Canadian government to take action. Industry leaders are calling for policy adjustments, including potential subsidies for homebuilders or negotiations to reduce tariffs. Some provinces may introduce tax incentives to counteract the impact on housing prices.

Economic Implications of the Tariffs Beyond Real Estate

The Broader Impact on Canada – U.S. Trade Relations

Beyond the housing sector, the tariffs are part of a broader trade dispute between Canada and the U.S. that could have wider economic consequences. Retaliatory measures from Canada could escalate trade tensions, affecting industries beyond real estate and potentially leading to slower economic growth. Such uncertainty may dampen consumer confidence, further impacting housing demand.

The Role of Inflation and Interest Rates

With construction costs rising, inflation could see an uptick, influencing the Bank of Canada’s monetary policy. If interest rates remain high to combat inflation, mortgage affordability could decline further, reducing overall housing market activity.

Considering Mortgage Refinancing as a Solution in Canada

Given the rising costs and market uncertainties, homeowners looking for financial flexibility might consider mortgage refinancing as an option to lower their monthly payments or access home equity for renovations. Refinancing can help offset increased costs associated with housing price inflation and construction expenses. For more information on mortgage refinancing options, visit Cannect Mortgage Refinancing.