Trade disputes with the United States and the high number of new apartments being built in Canada is weighing on the country's housing market, according to a new report from Oxford Economics.
In its note, Oxford said Canada's average national asking rent of $2,129 per month in May was down 3.3% from the same month a year earlier. Calgary, Vancouver and Toronto had the most significant declines in apartment rent over the past year, the report said.
Moreover, completions of new multifamily units jumped 35% in 2024, quickly adding to the country's supply, Oxford said.
"We expect strong rental supply growth will continue as the record number of purpose-built rental units under construction are completed and absorbed into the stock," Oxford said.
Meanwhile, weaker demand resulting from slower immigration and "fewer temporary residents will also curb demand for rentals," Oxford said. "However, worsening homeownership affordability and financial strain on households amid the trade-war-induced recession will likely keep a floor under rental demand in the coming quarters."
On the international front, United States President Donald Trump had threatened to escalate America's trade war with Canada over tariffs unless its government rescinded its digital service tax targeting U.S. tech giants with billions of dollars in taxes.
Canadian Prime Minister Mark Carney's government relented, and the two countries agreed that parties will resume negotiations and look to hammer out a deal by July 21. But there's no guarantee that will happen.
"Unless an immediate deal is reached to remove most US-Canada tariffs, we expect the housing slump will extend through the end of 2025," said Tony Stillo, director of Canadian economics at Oxford Economics, in his analysis.
Stillo said he expects any recovery in the resale housing market to stall as poor affordability, weak confidence and job losses from a recession that is "now likely underway" will continue to weigh on demand. He said a shrinking population, due to immigration cuts, will also weigh on the sector.
"This will also push up the supply of homes for sale, causing average prices to fall a cumulative 8%-10% by the end of 2025," said the economist in a commentary.
CoStar Market Analytics also said it sees some "rebalancing" in the multifamily market.
"From a regional standpoint, market vacancy rates are approaching more balanced levels in extremely unaffordable urban markets like Toronto and Vancouver while moving toward cyclical highs in Alberta," said CoStar in a report.