As feared, the new administration in the United States has imposed onerous tariffs on Canadian goods imported into the U.S. The 25% charge is being applied to everything except energy products. The effects of the tariffs and the retaliatory measures will be significant here, and housing and real estate will be hit. How hard remains to be seen.
The impacts on housing and real estate will trickle down from the broader economy. Interest rates, employment and the potential for recession will affect decisions on buying and building homes.
In the meantime, there are a couple of matters that could have more immediate affects on the market: interest rates and the federal government’s decision to delay the implementation of its new capital gains tax rules.
In the 2024 budget Ottawa was set to increase the capital gains inclusion rate – the portion of gains that is taxable – from 50% to 66.7% for individuals earning over $250,000 in annual capital gains, as well as for corporations and most types of trusts. That plan has now been pushed back to January 1, 2026. For average Canadians this would mainly affect those selling a second residence, such as a cottage. The delay could see some properties come onto the market with owners hoping to take advantage of the tax saving.
The Bank of Canada continues to cut interest rates and trimmed another quarter-point off its policy rate at its last setting. That is certainly good news for anyone with a variable-rate loan. Further rate cuts are now more likely, as the tariffs are expected to slow the Canadian economy.