The Bank of Canada reduced its key interest rate by 0.25 per cent to 2.5 per cent on September 17, mirroring a similar move in the US.
This decision comes after five consecutive months of small increases in national home sales, which rose just over 1 per cent last month according to the Canadian Real Estate Association (CREA).
Real estate represents a significant portion of Canada’s economy, making up nearly 400 billion Canadian dollars of the country’s gross domestic product, approximately 13 per cent of the total economy.
Many potential homebuyers had been hesitant to invest amid economic uncertainties, particularly those related to US tariffs on Canadian imports.
The central bank’s governor, Tiff Macklem, said tariffs were a big factor weakening the Canadian economy but noted housing activity showed “signs of resilience” despite job losses and economic challenges.
“Obviously, tariffs are weakening the Canadian economy,” Macklem said.
“We are proceeding carefully… We don’t want Canadians to have to worry about big increases in the cost of living.”
The interest rate had previously climbed from just 0.25 per cent in early 2022 to 5 per cent the following year, its highest since 2001, before beginning a gradual decline as the country battled post-pandemic inflation.
CREA’s senior economist Shaun Cathcart said that high interest rates had kept the market “mostly asleep” for three years, with recent tariff concerns further dampening activity.
“We thought that 2025 was going to be a rebound year,” Cathcart said.
“And then, of course, what happened was this total tariff chaos just completely derailed that.
“People just pulled right back and said, ‘We’re not going to make any big decisions like this, I don’t know if I’m going to have a job.'”
The federal government is also taking steps to address housing challenges.
On September 15, Ottawa unveiled Build Canada Homes, a new agency with a 13 billion Canadian dollar mission to increase construction of up to 50,000 “factory-made” housing units on federally owned land.
Housing and Infrastructure Minister Gregor Robertson emphasised the importance of housing to Canada’s economy despite regional variations in market performance.
“Generally, the market is challenged by the US tariffs and the threats we face across the global economy with wars and uncertainties,” Robertson said.
“Housing and infrastructure are right at the core of Canada’s economy… It’s critical that we leverage that overall investment and create more jobs, create more homes.”
