Scotiabank Says Early-2025 Optimism in Canada's Housing Market Sidetracked by Rising Global Trade Frictions, Uncertainty

08:14 AM EST, 01/16/2026 (MT Newswires) -- Canada started 2025 with moderate optimism on the housing market with the expectation it would benefit from the easing in the Bank of Canada policy rate since the summer of 2024, along with the resulting decline in mortgage rates, said Scotiabank.

The bank was also expecting economic and income conditions to firm up in 2025, which would have added support to housing demand. Scotiabank was also predicting the MLS HPI to start recovering, along with tightening housing market conditions.

Then the new United States administration started discussing and subsequently implemented significant tariffs on its imports from most origins, including Canada. It is true that Canada didn't face as steep of an effective tariff increase as other countries, but it was significant enough to slow its exports, stated Scotiabank.

The uncertainty this global trade climate generated contributed to softening domestic economic conditions more broadly, including for the housing market, pointed out the bank.

As a result, housing resale activity started 2025 showing monthly declines through March. Housing resales recovered in subsequent months to August but went back to their downward path after.

National unit sales have ended 2025 below their December 2024 level. As a result, national housing market conditions eased in 2025 as reflected by the decline in the sales-to-new listing and with the rise in recently completed and unabsorbed dwellings, added Scotiabank.

Not surprisingly, given the softening in market conditions, the national MLS HPI continued its trend decline in 2025. But despite this trend decline in 2025, and essentially since early 2022, the national MLS HPI was still significantly above its pre-pandemic level in Q4 2025. This was also the case for all local markets that Scotiabank tracks that also report this price index.

The bank expects a modest tightening in housing market conditions along with an improvement in household employment and income conditions, which should help generate a modest recovery in the national MLS HPI, but likely increasing at a lower than 2% pace. This pace of MLS HPI growth should firm up as market conditions tighten in the medium term (post 2026), according to Scotiabank.

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