2025 Real Estate Forecast: Economic and Population Growth Fuels Optimism
We attended the REALTORS® Association of Edmonton’s annual Housing Forecast yesterday and returned home with lots of interesting information about what to expect in the coming year. The speakers included Economists, data analysts, CEOs and a Minister from the Government of Alberta. Every presenter was cautiously optimistic about Alberta’s economy and the Greater Edmonton Housing market for the coming year.
What is causing all this optimism? Dale Nally, Minister of Service Alberta and Red Tape Reduction, pointed out that with 12 of Canada’s population, Alberta has 25 of the jobs in this country. Provincial housing starts surged to a 10-year high in 2024, with 33,000 starts. Alberta was second only to Ontario, and the most significant gains were seen in the Edmonton area. This means more inventory of new homes will be available for purchase in 2025. He also noted the provincial surplus forecast for 2024/2025 has increased from $2.9 billion to $4.6 billion.
Another reason for optimism is our growing population, which increased by 4.8 in the first three quarters of 2024. Chris Jokel, Senior Data Engineer at CREA, noted that population growth is expected to drop well below the numbers we’ve seen for the past few years due to new immigration policies implemented by the federal government, but it will still be ahead of long-term norms.
Interest rates
Chris Jokel told us interest rates are expected to stabilize in 2025. They may stay where they are now, or there could be one more drop. On the other hand, Douglas Porter, Chief Economist and Managing Director of BMO Financial Group, said they expect rates to continue to drop in 2025.
Porter explained that our economy is one of the most interest rate-sensitive in the world, primarily because housing is such a big part of it. Last year’s rate cuts were the most aggressive in the world, at 1 ¾; Canada did a better job of bringing down inflation than other countries last year.
Trump Card
Economists generally expect Trump to be positive for US growth, with a strong US dollar and upward pressure on interest rates. Douglas Porter told us the number one risk to the Canadian economy is whether or not incoming President Donald Trump lives up to his tariff threat (or even half of it). If the 25 tariff is enacted, BMO predicts a 2-3 drop in Canada’s GDP and at least a mild recession. In response, interest rates could be slashed, and we’d see more fiscal spending. Meanwhile, the Canadian dollar would weaken significantly.
Sales
REALTORS® Association of Edmonton Chair Darlene Reid said that single-family home sales will lead the way with a 3.8 increase in sales in 2025 in the Edmonton area, while condo sales are expected to rise by 3.2 and semi-detached homes by 2.4, for an overall 3.3 increase. Chris Jokel explained that CREA predicts an 8.6 increase in sales nationally, which gets us back to "normal" levels. Sales are expected to increase the most in Ontario and B.C., where they decreased the most during the past 18 months due to higher interest rates.
Prices
Reid said average prices are expected to rise by 2.4 in 2025. Detached homes will be up 2.7, semi-detached homes by 3, and condos by 0.5. Jokel predicts a 4.7 increase in prices nationally. Prices are expected to rise the most in the more affordable markets in the prairies and Maritimes (because that’s where they have room to grow).
Risks
Chris Jokel explained external factors that could cause the housing market to outperform or underperform expectations:
If the pent-up demand is higher than expected due to lower interest rates, we could see more sales than forecasted. Lower rates could motivate first-time and "move-up" buyers to jump off the fence and into the market.
The recent federal policy changes allowing 30-year amortization for first-time buyers and newly built homes could also increase demand more than expected. Another policy increasing the maximum allowable insured mortgage from $1 million to $1.5 million is expected to have more of an impact in markets with higher housing costs like Toronto and Vancouver.
Prices may not rise as much as predicted if they become unaffordable.
If Trump’s tariffs are enacted, sales and prices would likely be negatively impacted due to the adverse effects on Canada’s economy.
So, it’s a cautiously optimistic forecast for the housing market in the Greater Edmonton Area in 2025. I’m sure these forecasts will be updated in the coming weeks, and I’ll include them in my regular monthly updates on the real estate market in Edmonton.
