The news has been dominated by the ongoing debate over tariffs, and while it may be tempting to tune out the noise, the economic consequences for Canada are becoming impossible to ignore. The new levies, introduced by the U.S., are already sending shockwaves through various industries, and the real estate market is one of the hardest hit.
Despite efforts by Canadian leaders to mirror the populist rhetoric of former U.S. President Donald Trump — including implementing retaliatory tariffs — the damage to Canada’s economy is unfolding at a rapid pace. Ontario Premier Doug Ford, in a stark warning issued prior to the tariff implementation, made it clear just how devastating the situation could be. Ford stated, “The coming days and weeks will be incredibly difficult. Trump’s tariffs are going to devastate our economy and will put up to 450,000 jobs at risk from every sector in every region. No one will be immune, everyone will feel the impact.”
As of now, a 25% tax has been slapped on nearly all goods Canada exports to the U.S., with energy and resources facing a 10% tariff. Industries across the board are bracing for the worst, including the Ontario Home Builders’ Association (OHBA), which has voiced serious concerns over the tariffs’ potentially catastrophic effect on the housing market.
In a statement, the OHBA expressed deep anxiety about the future of the residential construction sector, calling Trump’s tariffs an “extremely concerning” development. The group warned that this could lead to a significant slowdown, possibly even “decimating” the already fragile market.
“The risk of a resulting economic downturn is significant. And as a result, we will undoubtedly see fewer housing starts, ongoing projects grinding to a halt, and completed projects struggling to close,” the OHBA wrote. The organization noted that the mere threat of tariffs, even before their official implementation, has already caused considerable uncertainty and harm to the housing sector. With real estate sales, especially for pre-construction homes — and particularly pre-construction condos — at alarmingly low levels for months, the situation is growing dire.
According to the OHBA, residential project starts in Ontario fell by 16% last year, despite ongoing calls from government officials for more homes to accommodate the province’s rapidly expanding population. In certain cities, such as Guelph and Brantford, this decline has been even steeper, with some areas experiencing a drop of up to 60% in new projects between 2023 and 2024.
Compounding this problem are rising lending rates, soaring costs of living, and an overall sense of economic instability, which has caused many investors — who traditionally play a significant role in the GTA’s new condo market — to retreat. Investors are now fearful of losing money on their holdings, especially as the market becomes less predictable.
From 2022 through mid-2024, over 24,000 homes across various developments were delayed or cancelled due to the lack of presales, which resulted in insufficient funds to continue construction. More projects are being deferred, and some developments are even being sold off to the highest bidder after defaulting on building loans. Developers are facing a tough choice: abandon projects, turn them into rental properties, or enter receivership as the market stalls.
The OHBA is warning that the combination of tariffs, a depreciating Canadian dollar, and rising construction costs could place even more pressure on those attempting to launch new developments. As they pointed out, “Where available financial capital cannot get a reasonable return, it usually flees the jurisdiction. This will not be good for Ontario or Canada.”
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The situation is grim: housing starts were already down, and the introduction of tariffs only exacerbates the problem. The outlook suggests that more projects will go unsold, be converted to rental units, or fall into receivership. As the Canadian housing market teeters on the brink, we could be looking at a prolonged slump, with the potential for lasting repercussions that could ripple through the economy for years to come.
In conclusion, the tariffs are not just a political issue; they are a full-fledged economic crisis that threatens to destabilize Canada’s housing market at a time when the need for more homes has never been greater. The country’s residential construction sector faces an uncertain and volatile future, and its consequences could be felt for a long time to come.
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