Understanding the Link Between U.S. Tariffs and Canada’s Real Estate Market

Certainly, you have heard the term “U.S. tariffs on Canadian imports” a thousand times in various media. From a historical perspective, trade disputes are nothing new, but these tariffs do have a real impact on our daily lives, in fact, a very important impact, if you’re planning to buy, sell, or even renovate a real estate property in Canada.

So, how do U.S. tariffs on Canadian imports affect the real estate market? Let’s take a closer look.

Key Takeaways

• Slow Market in 2018: In 2018, U.S. tariffs led to a drop in home sales and prices in Canada, but the market bounced back after they were lifted in 2019.
• Economic Uncertainty: Tariffs create uncertainty, making buyers and investors hesitant and slowing down market activity.
• Rising Construction Costs: New tariffs could increase construction costs, leading to higher home prices, particularly in major cities like Toronto.

Tracking the Tariff Impact on Canadian Real Estate from 2018-2019

In March 2018, the first Trump administration announced new tariffs, 25% on steel and 10% on aluminum, adding strain to U.S.-Canada trade relations. By June, those tariffs were in place, and Canada retaliated with its own tariffs in July. The good news? Both countries reached an agreement to get rid of them in May 2019. But how did the real estate market respond during that period?

Let’s track monthly home sales from January 2018 to December 2019 based on data from Canadian Real Estate Association (CREA). Before tariffs were introduced, sales increased steadily, from 24,931 in January 2018 to a peak of 50,640 in May. 

After the tariffs took effect in June, sales dropped to 47,413 and kept falling, reaching 21,909 by December 2018. This decline was sharper than the usual seasonal fluctuations; simply put, the tariffs hurt the market.

In 2019, sales started lower at 23,968 in January (vs. 2018), but recovered to reach a peak of 54,599 in May, coinciding with the lifting of tariffs in the same month. Then, sales followed a typical seasonal trend, falling to 26,976 in December. Compared to 2018, several months in 2019 saw increased sales, such as July (47,793 vs. 41,872) and December (26,976 vs 21,909).

Based on this data, it seems that tariffs likely adversely impacted sales in late 2018, while their removal led to market growth in 2019. Other variables, such as interest rates, also influenced the market, but looking at the market over a longer period suggests that the impact of tariffs was significant.

Now, let’s see how the national average price of Canadian homes changed from January 2018 to December 2019 and how it relates to the U.S. tariffs. 

Before the tariffs, home prices were relatively stable, increasing from $481,562 in January 2018 to $496,084 in May, which is an approximate rise of $14,500 over five months. When the tariffs took effect in June, prices remained unchanged at first but then fell to $475,591 by August and decreased to $472,280 in December (the year’s lowest point). In plain English, tariffs may have slowed construction or made buyers cautious.

In 2019, prices started even lower at $454,776 in January (vs. 2018), but then rebounded, reaching $507,837 in May (tariffs removal month). After that, prices remained high, peaking at $528,728 in November before decreasing to $517,124 in December. Compared to 2018, home prices were generally higher in 2019, especially in the second half of the year. What does that tell us?

Obviously, tariffs influenced price declines in late 2018, likely due to higher costs or market uncertainty. Once they were removed, prices recovered, indicating a possible tariff effect. 

From 2018 to 2025: What’s Changed in the Canadian Real Estate Market?

Looking at the past can help us understand where the real estate market might be going, but it’s important to consider other factors that shaped those trends. In 2018 and 2019, the market remained relatively steady, likely supported by low interest rates and a strong job market.

Today, things are different. Borrowing costs have risen, the overnight lending rate, which stayed below 1.75% in 2018 and 2019, is now around 3%. After two years of inflation, the Canadian economy in 2025 faces new challenges that differ from the situation when tariffs were first introduced in 2018.

While it’s hard to say exactly how tariffs might affect real estate now, some positive changes could help balance the market. An increase in available homes, adjustments to mortgage rules allowing for longer amortization periods, and a rise in the insured mortgage price cap from $1 million to $1.5 million are all promising signs. 

And with interest rates expected to decrease, we can be optimistic about the market’s capacity to adapt to the new conditions.

How US Tariffs Could Affect the Market

For Canadian real estate investors and homeowners, staying informed about these potential impacts is key. 

Challenges of Rising Construction Costs

We expect that one of the main challenges facing the Canadian real estate market will be the rise in construction costs. Why? Because many essential materials, such as steel, aluminum, lumber, and electrical components, are sourced from or pass through the U.S.

If new tariffs are imposed, then developers and homebuilders may face higher costs, which could consequently be passed on to buyers and renters. For homeowners looking to renovate, this could result in increased expenses for materials and labour. 

Investors in pre-construction condos and new developments should also be cautious, as rising costs could lead to delays, price increases, or even canceled projects.

Impact on Housing Prices

We anticipate that increasing construction costs will likely lead to even higher home prices. In cities such as Toronto and Vancouver, where affordability is already a concern, this could create even more challenges for buyers trying to enter the market. 

For investors, the effects could be mixed. Rising prices might lower the demand and reduce market activity, but they could also increase the price tag of existing properties. Those who already own real estate may see advantages from this price increase, while prospective buyers could face even greater challenges.

Interest Rate Fluctuations

U.S. tariffs could have a ripple effect on interest rates in Canada. If tariff wars push inflation higher in the U.S., the Federal Reserve will likely raise interest rates, and the Bank of Canada will do the same. This means higher borrowing costs for mortgages and real estate investments.

Homeowners with variable-rate mortgages should monitor potential rate increases, as they could result in higher monthly payments. Investors who use financing to purchase properties should also be cautious, as rising interest rates might reduce profit margins on rental properties or pre-construction investments.

Reactions from Buyers and Sellers

Economic fluctuations, like changes in tariffs, often create uncertainty, which can make both buyers and investors hesitant. When people are not sure about things like job security, inflation, or interest rates, they tend to hesitate when it comes to making big and important financial decisions, like buying homes.

If tariffs are put in place, Canada’s reaction could add even more uncertainty. Investors might choose the wait-and-see strategy. However, some buyers might feel a sense of urgency, hoping to buy before prices rise again. If construction slows down and housing supply decreases, demand could push prices higher, forcing some buyers to act quickly.

On the other hand, if many people pause their home search, certain areas, especially those more prone to economic shifts, could see a slowdown. Ultimately, home prices will depend on how Canada handles the trade tensions and whether the government steps in to help stabilize the market.

Our Advice to Homeowners and Investors

Given the potential shifts in the market, we advise Canadian investors and homeowners to consider the following strategies:

• Lock in Mortgage Rates: We suggest locking in a fixed-rate mortgage to maintain stability in your monthly payments and protect yourself from future rate increases.
• Monitor Construction Costs: If you’re planning a renovation, we recommend securing materials in advance to avoid potential price hikes. Developers should also take rising costs into account when evaluating pre-construction investments.

Stay Informed on Policy Changes: Stay updated on any tariff adjustments or economic policy changes. Being informed will help you make well-considered decisions in the real estate market.

Bottom Line

The Canadian real estate market is influenced by many factors like interest rates, government policies, population trends, and economic stability. While tariffs might seem worrying at first, they’re just one part of the bigger picture. 

If you’re feeling uncertain about buying this spring, remember that real estate markets can look very different depending on where you are. Focus on what’s happening in your local market, and try to concentrate on what you can control, like your budget and investment choices. This will help you feel more in control during uncertain times.

And if you need personalized guidance, contact us at Platinum Condo Deals today, and we’ll be happy to provide expert advice tailored specifically to your needs!