As Canada’s economy grapples with the fallout from the ongoing trade war with the U.S., one economist says the closely watched Canadian housing market may be its next casualty.
Tariffs imposed by U.S. President Donald Trump’s administration will inflict pain on every one of Canada’s economic sectors, even those not directly dependent on exports to the U.S., according to Tony Stillo, Director of Canada Economics at Oxford Economics.
“Tariffs are going to hit the targeted sectors obviously, but they’re big enough that they’re going to cause a broad recession,” he told BNN Bloomberg in a Tuesday interview.
“When you have a broad downturn in the economy, all sectors get hit and housing is not immune.”
Stillo noted that Canada’s housing market has already been feeling the impacts of the economic uncertainty that the threat of tariffs has created.
“In the past few months, the housing market has turned south. We’ve seen buyers get nervous, they’re worried about their jobs, worried about their income security, and they’re pulling back,” he explained.
“At the same time, we’re seeing listings rise, so there’s potentially more distressed sales; people that have to sell. The combination of that is a market that’s moved much weaker, much looser, and prices have fallen, and we can expect them to continue to fall.”
Stillo said he’s expecting another five per cent drop in housing prices across the country, although it will vary depending on the market. But he noted that there’s still a limit to how far prices will fall considering the undersupply of housing in Canada along with falling borrowing costs.
“Keep in mind, there’s a floor to this. We do have lower interest rates, they’re stable, we have looser lending guidelines – things that will prop up (the market),” he explained.
Even with an expected drop in prices, Stillo said housing affordability isn’t going to improve any time soon, as the continuation of trade tensions with the U.S. will weigh on the purchasing power of Canadian homebuyers.
“The lower prices are going to offset what are probably going to be lower incomes and a little bit less confidence, so we’re looking for affordability actually to stay roughly stable,” he said.
Stillo said that in the coming weeks and months, home prices in Canada’s largest cities with hot housing markets like Toronto and Vancouver are “the most likely” to see declines, along with markets that are dependent on industries exposed to tariff risks, like the energy sector.
“Markets like St. John’s in Newfoundland and Edmonton and Calgary, they’re quite vulnerable if we do get tariffs on our energy exports to the U.S.,” he said.
Trump is expected to make an announcement from the White House Wednesday afternoon about sweeping “reciprocal” tariffs against any nation that imposes levies on American goods, on what the U.S. president is calling “Liberation Day.”
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U.S. President Donald Trump’s reciprocal tariffs on trading partners are set to take effect on April 2, a day he has proclaimed as “Liberation Day” for American trade. CTV News will have extensive coverage across all platforms:
- CTVNews.ca will have in-depth coverage, real-time updates, and expert analysis on what the tariffs will mean for Canadians.
- CP24.com will report on any developments out of Queen’s Park and what the tariffs mean for the people of the GTHA.
- BNNBloomberg.ca will explain what this means for the business community, investors, and the market.
