As part of our two-part series, last week real estate expert Anita Springate-Renaud shared her insights on the outlook for the real estate market in the coming year, highlighting the impact of interest rates, market demand, and economic factors. If you missed it, you can revisit the Q&A with Anita – Part 1 here.
This week, we continue the discussion with Anita’s forecast for the Canadian real estate market over the next five years. Is now the right time to buy? Let’s find out.
Q: What is the forecast for the next five years of real estate in Canada?
The next five years of real estate in Canada will be shaped by interest rates, economic growth, housing supply, and immigration trends.
While there may be some short-term fluctuations, the long-term outlook suggests continued demand for housing, particularly in major urban centers like Toronto, Vancouver, and Montreal.
Key Predictions for 2025-2030:
1. Interest Rates Will Play a Major Role
- Rates are currently 5.2% and trending downwards if they continue to decline, affordability will improve, fueling more buying activity.
- However, if inflation resurfaces and rates rise again, it could slow demand, especially in high-priced markets.
- The Bank of Canada is expected to gradually lower rates over the next few years, but not return to the ultra-low rates of the past decade.
2. Home Prices Will See Steady Growth
- While price spikes like those seen in 2021-2022 are unlikely, moderate and sustainable price growth is expected over the next five years.
- Markets with strong job growth, high immigration, and limited housing supply such as Toronto, Vancouver, and Calgary will likely see the most appreciation.
- Smaller cities and suburban areas will continue to attract buyers looking for affordability.
3. Housing Supply Will Struggle to Keep Up with Demand
- Canada’s housing shortage remains a major issue, with new construction not keeping pace with population growth.
- Government incentives and policies (such as increased homebuilding targets) could help, but supply constraints will keep prices elevated in many markets.
- The rental market will also remain tight, as affordability challenges push more people to rent rather than buy.
4. Immigration Will Drive Demand
- Canada’s high immigration targets (over 500,000 new immigrants per year) will continue to fuel housing demand, especially in major cities.
- This will increase pressure on both the housing and rental markets, particularly in regions with strong job opportunities.
5. Market Stability Expected After 2026
- 2025-2026: The market is expected to gradually recover as interest rates decline and more buyers return.
- 2027-2030: With economic stability and consistent population growth, Canada’s housing market will likely see steady price appreciation and strong long-term demand.
Bottom Line:
- Over the next five years, Canada’s real estate market is expected to grow at a steady pace, driven by declining interest rates, population growth, and persistent housing shortages. While there may be short-term fluctuations, real estate remains a strong long-term investment in most major cities.
Q: How do real estate investors adjust their strategies based on interest rate movements?
Interest rates play a crucial role in real estate investing, directly impacting financing costs, property values, and investment returns. Smart investors adjust their strategies based on whether rates are rising, falling, or stabilizing to maximize their returns and minimize risks.
1. When Interest Rates Are Declining (Current Trend: 5.2% and trending down)
Strategy: Expansion & Leverage
- Increase Property Acquisitions: Lower borrowing costs make financing more affordable, encouraging investors to buy more properties.
- Refinance Existing Loans: Investors with higher-rate mortgages often refinance to lock in lower rates and improve cash flow.
- Consider Variable-Rate Loans: With rates trending downward, investors may opt for variable mortgages to take advantage of further decreases.
- Focus on Appreciation Markets: Lower rates typically drive higher demand, increasing home prices in high-growth areas.
2. When Interest Rates Are Rising
Strategy: Defensive & Cash Flow Focused
- Prioritize Cash Flow Over Appreciation: Rising rates can slow price growth, so investors focus on properties with strong rental income.
- Lock in Fixed-Rate Mortgages: Fixed rates provide stability, protecting against further interest rate increases.
- Reduce Leverage: Investors may limit new borrowing or pay down debt to avoid high-interest payments.
- Look for Distressed Properties: Higher rates often lead to less competition and motivated sellers, creating opportunities to buy undervalued properties.
3. When Interest Rates Are Stable
Strategy: Diversification & Long-Term Growth
- Balance Fixed and Variable Loans: Investors may hold a mix of mortgage types, adjusting as needed.
- Expand to Different Property Types: Some may invest in commercial, multi-family, or vacation rentals to diversify risk.
- Invest in Renovation & Value-Add Properties: Stability allows time for property improvements that increase rental income and long-term value.
Bottom Line:
- Smart real estate investors adapt their strategies based on interest rate movements. When rates drop, they expand and refinance; when rates rise, they focus on cash flow and risk management. By staying informed and adjusting accordingly, investors can continue to build wealth regardless of market conditions.
Q: Is now a good time to buy, or should buyers wait?
Now is a Great Time to Buy But The Window of Opportunity is Closing
The current real estate market remains a buyer’s market, meaning buyers have more negotiating power, increased inventory to choose from, and less competition. However, this window of opportunity won’t last long. As interest rates continue to trend downward and more buyers regain confidence, the market is expected to shift quickly toward a seller’s market.
Why Is It Still a Buyer’s Market
- Less Competition: Many buyers have remained on the sidelines due to high borrowing costs, meaning those who act now face fewer bidding wars and have greater leverage in negotiations.
- More Negotiating Power: Sellers in a buyer’s market are often more willing to accept lower offers, cover closing costs, or make concessions to secure a deal.
- Increased Inventory: More homes on the market mean buyers can be selective, taking the time to find the right property without feeling rushed.
Why It Will Shift to a Seller’s Market Soon
- Lower Interest Rates Will Bring More Buyers: As rates continue to decline, more buyers will jump back in, increasing demand.
- Reduced Inventory Creates Competition: With more buyers entering the market, available listings will decrease, leading to multiple-offer situations and driving prices up.
- Sellers Will Gain Leverage: Once demand outpaces supply, sellers will have the upper hand, with homes selling faster and at higher prices.
Take Advantage Before the Market Shifts
Buyers who act now can secure a home at today’s prices before competition heats up. Once the market shifts, waiting could mean higher prices, fewer choices, and bidding wars.
Bottom Line:
Now is the perfect time to buy while conditions still favour buyers. As more people enter the market, the balance will tip, and the opportunity for great deals will disappear.
Conclusion
We at KP BOOKS CO want to thank Anita for her insightful Q&A. We hope you found her expert advice as valuable as we did. Understanding how interest rates, market trends, and strategies impact real estate decisions is crucial, especially in today’s evolving market. If you’re considering buying or selling in the Toronto/GTA, you can reach out to Anita and her team at Engel & Völkers Toronto Central, Brokerage.
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About Anita Springate-Renaud
As a third-generation real estate professional with over 25 years of experience, Anita has built a thriving business grounded in her extensive market knowledge and unwavering dedication to her clients.
As the Owner and Broker of Record for Engel & Völkers Toronto Central with shops throughout Ontario, Anita and her team specialize in residential and commercial properties, condominiums, and new developments. She has been pivotal in helping clients achieve their real estate objectives by leveraging the world-class marketing tools and technology platforms that define Engel & Völkers’ service in over 35 countries.
Recognized with numerous awards, Anita holds prestigious designations, including membership in the Professional Athlete Advisory and Private Office—exclusive groups within the Engel & Völkers network with fewer than 300 members worldwide who serve high-net-worth clients and family offices managing premium real estate assets globally.
