Is Canada's real estate market about to pick up?

Canada’s real estate market is entering a promising new phase as lower borrowing costs and improving economic conditions signal renewed investor interest, according to analysts. They suggest 2025 will mark the beginning of a revitalized investment cycle, particularly in commercial and residential sectors.

Reid Taylor, senior vice-president of capital markets at Colliers Canada, highlighted a shift in investor sentiment, driven by declining inflation and interest rates. He said the consensus is that this is the start of a new cycle, noting that the sluggish activity of the past two years is poised to give way to steady growth.

“We’re still in the midst of a period of quite sluggish investment activity after both 2023 and this year. So some patience is required,” Taylor said in an interview with BNNBloomberg.ca in December. “We’re not going to see a surge of activity necessarily in Q1, Q2, but I can tell you, the consensus certainly seems to be that this is the start of a new cycle, like the worst is over.”

Retail properties, particularly grocery-anchored centres, are attracting significant attention, along with industrial and multi-family housing sectors. Taylor emphasized that global and domestic capital is expected to play a central role in this recovery.

Surge in residential market activity

Phil Soper, president and CEO of Royal LePage, predicts a strong recovery in Canada’s residential market, buoyed by first-time buyers re-entering the market. Lower borrowing costs have made homeownership more accessible, particularly following the Bank of Canada’s October rate cut.

“We anticipate that there’ll be an even stronger investment market once we settle in at neutral interest rates, when the Bank (of Canada) gets to the point where they’re neither slowing nor stimulating the economy, which hopefully occurs sometime in the second half of 2025. I believe we’ll see more small investors, individual landlords in the country,” Soper told BNNBloomberg.ca.

Royal LePage forecasts a 6% increase in national home prices by the end of 2025, with single-family detached homes leading at 7%. Regional variations include a 5% rise in Toronto’s aggregate prices and a 6.5% increase in Montreal. In Vancouver, condo prices are expected to grow by 4.5%, driven by new market inventory.

Office market recovery

While the office sector has lagged other property types, Taylor noted signs of improvement. Suburban office properties, supported by improving leasing conditions, have shown increased activity in Toronto.

The “flight to quality” trend—favouring professionally managed, high-quality office buildings—remains a critical factor in this recovery. As valuations stabilize, experts anticipate increased investment activity in the office market.

Long-term outlook

Despite the challenges of recent years, Canadian real estate remains an attractive investment vehicle for individuals and institutions. Soper noted that the perception of real estate as a reliable long-term asset is driving interest among smaller investors. He also highlighted that home prices have consistently risen over time, even amid economic downturns, attributing this resilience to Canada’s persistent housing shortage.

Do you have something to say about the recent analyses? Share your thoughts in the comments below.