Navigating the Crosswinds: Canada’s Economy Shows Its Strength
- Mark
- Apr 28
- 3 min read
ECONOMIC SPOTLIGHT // Q1 2025
Homeownership became more affordable in the Greater Toronto Area (GTA) this March, as both borrowing costs and home prices declined year-over-year. These shifts have created more manageable monthly payments and opened the door for cautious buyers to re-enter the market.
But while affordability is improving, buyer confidence remains cautions. Trade tensions, the looming federal election, and employment uncertainty are keeping many households in “wait-and-see” mode. Until more economic clarity emerges, market activity is likely to remain subdued.
GTA Snapshot:
Sales: 5,011 homes sold (↓ 23.1% YoY)
New Listings: 17,263 (↑ 28.6% YoY)
Average Price: $1,093,254 (↓ 2.5% YoY)
MLS® HPI Composite: ↓ 3.8% YoY
Buyers now hold the advantage, with more inventory and less competition.
The Big Picture: Q1 2025 Economic Outlook
Canada’s economic foundation remains steady, but under pressure. The early months of 2025 have brought a mix of GDP growth, tariff tensions, and signs of consumer pullback.
This is what we call “cautious momentum”—forward movement, but with hesitation.
GDP Growth: Resilient Start, Cloudy Horizon
Real GDP rose by 0.4% in January, outperforming expectations. Goods-producing sectors led the charge, with strong output in energy, utilities, and construction. But early indicators show that February’s GDP may be flat, signaling a potential moderation in growth for Q2.
Sector Performance:
Residential construction: +1.4%
Manufacturing: +0.8% (rebound after two months of decline)
Retail trade: -0.9%
Auto sales: -3.2%
💡 Outlook: Q1 is tracking around 2.0% growth, but momentum could slow sharply if consumer spending and trade conditions deteriorate.
Retail Sales: Caution Creeps In
Retail sales fell 0.6% in January, with core sales (excluding autos and gas) down 0.2%. Big-ticket items like vehicles saw the steepest drops, suggesting that households are prioritizing essentials amid lingering financial stress.
Insight: Even with rate cuts expected, sentiment—not rates—is now the primary driver of spending behavior.
Auto Tariffs: A Wild Card in the Forecast
New U.S. tariffs—25% on some Canadian/Mexican vehicles and parts—are hitting the Canadian auto industry hard. While some manufacturers will adjust to comply with USMCA requirements, others may scale back production or raise prices.
Risks Ahead:
Disruption to Ontario’s manufacturing base
Higher input costs passed on to consumers
Delays in vehicle deliveries and infrastructure projects
Real Estate Connection: Higher costs on steel, aluminum, and transportation could squeeze developers—leading to fewer new builds, tighter supply, and higher resale prices.
Canadian Wealth & Financial Resilience
While household wealth grew modestly in late 2024 thanks to asset gains and softer rates, early 2025 suggests that optimism is fading. Cost-of-living concerns and job uncertainty are eroding the psychological sense of wealth, even if net worth remains stable.
Banking Snapshot: Strength With Caution
RBC: +43% YoY profit growth
National Bank: -14% YoY in net income due to credit loss provisions
Banks are adjusting to risk, not panicking. But they are tightening up—especially on business and consumer lending, which could slow broader investment and spending.
Mortgage Rate Forecast: Breathing Room Ahead
With inflation easing and growth holding, rate cuts are on the horizon:
Forecast Highlights:
Next expected BoC cut: April or June (25 bps)
Total cuts in 2025: 50–75 bps
Variable rates: Could dip to ~3.6% by mid-year
Fixed rates: Expected to hover around 3.89–3.99%
The REXIG Read: This is the breathing room buyers have been waiting for. But when confidence returns, competition will follow.
Tariff Watch: A Housing Issue in Disguise
Trade policy doesn’t just affect exports—it can also reshape housing.
Ripple Effects of U.S. Tariffs:
Increased construction costs
Slower pre-construction launches
Tighter rental markets
Rising values on existing inventory
Developers are facing tougher math. Buyers may want to act before pricing rebounds.
What to Watch Moving Forward
Confidence is key. Policy clarity around trade, housing, and rates will determine the pace of recovery.
Affordability remains fragile. Inventory is up, but buyers need certainty to act.
Mid-2025 could be a turning point. If trade tensions ease and rates fall, demand could surge into Q3.
The REXIG Read: Strategy Over Emotion
This is a market for strategic decision-makers—not speculators.If you’re buying, selling, or investing, understand the broader forces shaping each move.
👉 Book a strategy session with our team – rexig.ca/contact
Stay tuned for updates as we monitor these developments closely.
Sources
Disclaimer: The information provided in this blog post is for general informational purposes only and should not be construed as professional advice. REXIG Realty Investment Group does not guarantee the accuracy, completeness, or timeliness of the content. Readers are encouraged to seek professional advice tailored to their specific situation before making any real estate or investment decisions. REXIG Realty Investment Group is not responsible for any actions taken based on the information provided
