Canada's Housing Market Cools in March: Regional Divides and Investment Opportunities

The Canadian housing market continued its decline in March 2025, with sales and prices falling across much of the country. However, regional disparities have created a mosaic of opportunities and risks for investors. While coastal markets like British Columbia and Ontario face cooling demand, interior provinces such as Alberta and Saskatchewan are experiencing record price growth. This divergence, coupled with declining mortgage rates, is reshaping the investment landscape.

National Trends: A Market in Transition

The National Bank’s March report revealed a 4.8% month-over-month drop in home sales, marking the fourth consecutive monthly decline. Sales are now 20% below their November 2024 peak, and year-over-year sales fell 9.3%—the weakest March performance since 2009. Prices followed suit, with the MLS® Home Price Index (HPI) dropping 1% month-over-month and 2.1% year-over-year. The national average home price now stands at $678,331, a 3.7% annual decline.

The Sales-to-New-Listings Ratio (SNLR) fell to 45.9%, signaling a balanced market but also a loss of buyer confidence. Active listings rose to 5.1 months of inventory, the highest since the early pandemic, suggesting a slight shift toward buyer’s conditions. However, inventory remains below the 6.4-month threshold for extreme imbalance, indicating limited overcorrection.

Regional Disparities: Winners and Losers

The housing slowdown is far from uniform. Coastal markets are struggling, while interior provinces thrive:

British Columbia and Ontario:
- The Greater Golden Horseshoe in Ontario and British Columbia saw significant price softening. High debt levels and economic uncertainty, including tariff disputes, have deterred buyers.
- In Toronto, the average resale price dropped 4% year-over-year in March, while Vancouver’s prices fell 2.5%.

Prairies, Quebec, and Atlantic Canada:
- Alberta’s average home price hit $499,505 in April 2024, with Saskatoon and Calgary reporting all-time highs in benchmark prices. Strong demand from oil and gas sectors, combined with limited inventory, has driven growth.
- New Brunswick and Quebec also saw price increases, fueled by strong migration and constrained supply.

Mortgage Rates: Lower Costs, But Will They Spark a Rebound?

Mortgage rates have fallen sharply since their 2024 peaks. The prime rate dropped to 4.95% in April 2025, a 31.25% decline from 7.2% in April 2024. The Bank of Canada’s overnight rate is expected to fall further, potentially reaching 3.75% by mid-2025, which could push variable mortgage rates below 5%.

However, lower rates may not immediately revive the market. While affordability improves for some buyers, price declines and economic uncertainty—particularly in trade-dependent regions—could outweigh the benefits. Fixed mortgage rates, like the 5-year rate, are projected to stabilize around 4.18% in mid-2025, offering modest relief.

Investment Implications: Navigating the Divide

Investors must prioritize regional analysis and timing:

1. Focus on Growth Markets:
2. Alberta and Saskatchewan: Strong fundamentals in oil, agriculture, and tech sectors support demand. Calgary and Saskatoon’s rental vacancy rates are near decade lows, signaling long-term rental opportunities.

3. Quebec and Atlantic Canada: Undervalued markets with potential for price appreciation as immigration drives demand.

4. Be Cautious in Coastal Markets:

5. Toronto and Vancouver face overbuilt single-family housing markets and high price-to-income ratios. Investors should seek distressed sales or long-term holds, assuming prices stabilize by late 2025.

6. Rentals Offer Steady Returns:

7. Nationwide rental demand outstrips supply, with vacancy rates at decade lows. Multi-unit properties in growing regions (e.g., Edmonton, Calgary) offer stable cash flows.

8. Monitor Rate Cuts and Inflation:

9. If the Bank of Canada’s rate reductions outpace inflation, affordability could improve, boosting buyer sentiment. However, a prolonged economic slowdown could deepen corrections in overpriced markets.

Conclusion: A Divergent Market Demands Strategic Precision

Canada’s housing market is bifurcated, with opportunities concentrated in growth-driven provinces and risks lingering in coastal areas. Investors should prioritize regions with strong economic anchors, like Alberta’s energy sector, while avoiding overexposure to Toronto and Vancouver’s volatile markets.

The data underscores this split:
- Alberta’s home prices rose 12% year-over-year in 2024, while British Columbia’s dropped 5%.
- Rental vacancy rates in Calgary fell to 1.4% in 2023, compared to 0.8% in Toronto, signaling tighter conditions in core markets.

For buyers, now is a time to capitalize on inventory gains in balanced markets, but patience is key. Investors with a long-term horizon and flexibility to adapt to regional trends will position themselves to navigate this complex landscape.

In short, Canada’s housing market is no longer a monolith. Success hinges on understanding where growth persists and where caution is warranted—and acting accordingly.