How Will Tariffs Affect Toronto’s Real Estate Market?

Spoiler alert: We don’t have all the answers…but we do know the questions to ask and what to watch.

We know homeowners, buyers, and sellers across Toronto are wondering how Trump’s tariffs will affect the real estate market. While the current economic environment is unprecedented and impossible to predict, here’s what you need to know:

Tariffs 101

A tariff is a financial tool – a tax – that countries use to control the flow of products into their country.

Tariffs have traditionally been used to protect specific industries. For example, if a country wants to protect their dairy industry, it might use a tariff to discourage other countries from flooding its market with cheaper milk. While consumers would appreciate lower milk prices, it could threaten the very survival of that country’s dairy industry. A country like Canada doesn’t want to risk being dependent on other countries for something as basic as dairy.

I won’t even pretend to understand the ‘strategy’ behind what the US is doing with tariffs right now or why. But the tariffs are here, so it’s important to understand how they could affect us.

When a country imposes a tariff on another country, it’s essentially a tax on the country that’s doing the tariffing.

For example:

The US put a 52% tariff on China. That means that all goods imported into the US from China are now subject to a 52% import tax, paid by the person or company bringing the product into the US. So when H&M buys inventory to sell to American consumers, they can either absorb that tax (making them less profitable) or pass it onto the consumer (making the price of that dress 52% higher). The manufacturer in China could also choose to absorb the tax (reducing their profitability).

China retaliated with a 32% tariff, creating an environment where Chinese consumers will now face the same choices. So when they import soybeans or corn from the US, they’ll have the same options. The American producers can absorb the cost (making them less profitable), the Chinese import companies can absorb the tax (reducing their profitability), or they can pass it on to the Chinese consumers.

Nobody wins in a trade war – it’s pain all around.

So how will Trump’s tariffs impact Toronto real estate?

While it’s impossible to predict anything right now, here’s what we’re watching:

We’re Watching the Stock Market:

I’m writing this on the second full day after the tariffs were announced, so the stock markets are a blood bath. Continued negative performance could:

• Impact downpayments for first-time buyers and upgraders. If you’re planning on buying a home this year, make sure your downpayment is somewhere VERY SAFE. Market volatility could impact your savings if they’re heavily invested in stocks.
• Increase condo fees if reserve funds are invested in markets affected by tariff uncertainties. While most reserve funds are conservatively invested, it’s worth checking with your board about exposure to volatile markets.
• Impact the second home and cottage markets. Historically, luxury and recreational properties are the first to feel the pinch when economic uncertainty rises.
• Encourage investors to re-enter the real estate market: Given how volatile the stock market is right now, will investors re-enter the real estate market as a perceived “safer” option? Investor activity historically increases during stock market downturns.

We’re Watching Employment

Canada released their jobs report today, and we’re already seeing the impact of the tariffs on employment. Here’s how that could affect the real estate market:

• Consumer confidence: When people are nervous about losing their jobs, they don’t make big financial decisions like buying a home. They pause and they wait.
• Job losses: Homeowners who lose their jobs will struggle to pay their mortgages and may be forced to sell their homes. We were already facing a mortgage renewal crisis this year, with 1.5 million Canadians renegotiating their mortgages at much higher rates than what they’ve been paying.

We’re Watching Interest Rates

• Tariffs will likely lead to inflation, which, as we witnessed over the last few years, the government likes to control by increasing interest rates.
• However, declining economic activity could push the Bank of Canada to cut rates to stimulate growth. We saw how fast and often the BoC cut rates during the COVID recession. It’s a tricky balancing act.
• Fixed vs. variable rate mortgages. With uncertainty ahead, home buyers and homeowners renewing mortgages are facing tough choices. Talk to your mortgage broker about your options and worst-case scenarios.

We’re Watching for a Recession

A recession is defined as two consecutive quarters of decline in our GDP (Gross Domestic Product). In the last 50 years, Canada has weathered six recessions:

• 1974-1975 (the oil crisis)
• 1980 (another oil crisis)
• 1981-1983 (high inflation and tight monetary policy)
• 1990-1992 (US Gulf War, inflation, real estate speculation)
• 2008-2009 (subprime mortgage crisis)
• 2020 (COVID-19)

During a recession, consumer confidence is low, unemployment rises, and spending contracts. While a recession technically lasts a few months to a few years, the effects last much longer.

Given our proximity and close trading relationship, if the US falls into recession, that’s not good for Canada. But as we learned in 2008/2009, Canada doesn’t automatically follow the US into the depths of economic downturn. During that financial crisis, US home prices plummeted by an average of 33% and took many years to recover, while Toronto’s average home prices dipped by just 13% and recovered within 18 months, according to TRREB historical data.

Toronto Real Estate: More Resilient Than You Might Think

Toronto’s housing market has shown remarkable resilience over time. Several factors help insulate Toronto’s real estate market:

• Immigration remains strong. While we might not be welcoming as many immigrants to Canada as in past years, Canada still expects almost 400,000 people to move here in 2025. Historically, 30% of new permanent residents settle in the GTA. This creates ongoing housing demand regardless of economic cycles.
• Housing supply remains tight. Despite recent construction, Toronto faces a structural housing shortage. Experts estimate Ontario needs to build 1.5-2 million additional housing units by 2030 to meet demand—a target we’re currently not on pace to meet.
• Toronto’s new condo construction is essentially at a standstill. While unrelated to the tariffs, the record-low activity in the preconstruction condo market foretells an upcoming inventory problem in the next 3-5 years, likely leading to higher prices.
• Canadian lending practices are conservative. Our mortgage stress test requires buyers to qualify at higher rates than what they’ll actually pay, creating a buffer against payment shock.
• Toronto homeowners know they own a valuable asset. In past downturns, Toronto sellers have shown how stubborn they can be. Unless they ‘need’ to sell, they tend to change their selling plans vs. changing their price expectations.
• Real estate isn’t just an investment – it’s also home. No matter what happens in the economy, people still need a place to lay their heads and raise a family. Almost nobody buys or sells a home because of the economy – they do it because they got married or divorced, had a baby or became empty nesters, graduated or retired, or moved to the city or out of the city. Most moves happen because of lifestyle and demographics – not because of the economy.

The BREL Bottom Line

While tariffs add a new layer of uncertainty to an already complex market, Toronto real estate has historically been resilient through economic cycles. The key factors of tight supply, strong immigration, and prudent lending practices provide a foundation that helps buffer our market from severe swings.

We’ll be watching economic indicators closely and keeping you updated as the situation evolves. As always, the best real estate decisions are made with a long-term perspective, sound information, and personalized advice for your specific situation.

Have questions about how these economic changes might affect your personal real estate plans? We’re here to help! Reach out anytime for a no-obligation conversation about your options.