Trade-Driven Housing Slump: Strategic Opportunities in Undervalued Canadian Markets

The Canadian housing market is at a crossroads. Persistent U.S. tariff uncertainty has triggered a nationwide demand slowdown, with MLS prices flatlining and inventory piling up. Yet, beneath the surface, regional divergences are creating stark opportunities. For shrewd investors, this is a moment to act strategically, targeting undervalued markets poised to rebound once trade clouds clear.

The National Picture: A Housing Market Held Hostage by Trade Policy

Scotiabank’s Q1 2025 reports reveal a market frozen in limbo. The national MLS House Price Index (HPI) is nearly unchanged from January 2024, hovering at pre-2022 levels. But the real story lies in inventory:
- Months of supply rose to 4.2 months nationally, up from 3.9 in December 2024, signaling cooling demand.
- 70% of tracked markets saw sales declines in early 2025, with buyers waiting on the sidelines amid tariff-related income uncertainty.

The data underscores a sector-specific timing opportunity: investors who act now in select regions can lock in prices before trade clarity sparks a recovery.

Regional Resilience: Where to Bet

1. Quebec: Cooling Markets, Hidden Value

Quebec City’s housing market exemplifies the inventory gap creating buying opportunities:
- Sales collapsed 18.9% month-over-month in January 2025, while new listings surged 19.4%, shifting conditions from seller- to buyer-friendly.
- Single-family homes—a segment that outperformed apartments nationally—remain a bright spot.

Why now?
- Undervalued entry: Prices here are 12% below their 2022 peak, even as rental demand holds steady.
- Trade insulation: Quebec’s economy, less export-reliant than Ontario, faces fewer direct tariff impacts.

2. Atlantic Canada: Tight Supply, Resilient Demand

Newfoundland and Labrador’s inventory dropped to 4.3 months—a rare tightness in a cooling market. Key data:
- Months of supply fell 21% year-over-year, despite a 14.4% sales surge in St. John’s.
- Single-family homes in Atlantic Canada are 9% cheaper than their 2022 highs, yet rental vacancy rates remain below 2%.

Why now?
- Supply constraints: Aging housing stock and low construction rates ensure long-term scarcity.
- Government support: Federal rebates and regional development funds are primed to boost demand post-uncertainty.

Regions to Avoid: Ontario and B.C. Until Trade Clarity

While Quebec and the Atlantic Coast offer asymmetric upside, investors should exercise caution in:
- Ontario’s overheated markets: Guelph’s sales plummeted 49.4% month-over-month, signaling a bubble burst. Kitchener-Waterloo saw listings spike 38%, pricing out buyers until mortgage rates stabilize.
- British Columbia’s overhang: Despite no detailed data, its proximity to U.S. trade hubs and inventory surpluses (2.1 months above pre-pandemic norms) make it vulnerable to prolonged stagnation.

The Investment Playbook: Timing and Targeting

1. Focus on single-family homes: These held up better than apartments in Q1 2025 (+0.9% y/y vs. -3% for apartments).
2. Lock in now: Prices in Quebec and Atlantic Canada are 10–15% below peaks—the lowest since 2021.
3. Wait for trade clarity: Monitor U.S. tariff negotiations (expected resolution by late 2025) before scaling into Ontario/B.C.

Conclusion: The Trade-Driven Opportunity Is Now

The housing slump is a seller’s dilemma—but for buyers, it’s a gift. With MLS prices frozen and regional gaps widening, the smart move is to act selectively in Quebec and Atlantic Canada. These markets offer the best risk/reward: undervalued assets, supply-demand balance, and insulation from trade shocks.

Investors who wait for “certainty” may miss the window. The data is clear: act now in undervalued regions, avoid overexposed markets, and position for the rebound.