Vancouver’s real estate market, particularly the condominium segment, is operating in a complex and changing economic environment.
Looking ahead to 2025, two major economic events are expected to have a significant impact on the real estate market.
- Bank of Canada (BoC) cuts interest rates by 0.25%: Lower borrowing costs are likely to encourage homebuyers to enter the market.
- Former US President Donald Trump’s announcement of 25% tariffs on Canadian goods: expected to slow economic growth, weaken the Canadian dollar (CAD), and increase uncertainty.
There is a lot of interest in how these conflicting economic factors will impact Vancouver’s pre-sale market and how they will change buyer and investor sentiment.
The Bank of Canada cuts interest rates
Why did they cut rates?
On January 29, 2025, the Bank of Canada cut its benchmark interest rate by 0.25% to 3%.
This is the first rate cut since 2022, and its primary purpose is to
- Spur economic activity by lowering the cost of borrowing
- Ease the burden of high mortgage rates on households
- Rising interest rates boost real estate market
Let’s take a look at how these changes in interest rate policy will impact the Vancouver condo market.
The positive impact of lower interest rates on the sales market
1. Ease your mortgage burden
- For-sale buyers typically execute a mortgage months or years after closing.
- Lower interest rates are likely to encourage new buyers to enter the market as monthly payments are reduced.
2. increased investment demand
- Lower interest rates may make real estate investing a more attractive option than savings or bonds.
- Potential for increased investor participation in the pre-sale market in popular locations like Vancouver.
3. developers resume their projects
- Residential projects that have been put on hold due to high financing costs are more likely to move forward again.
- A variety of new condo options will increase buyer choice.
However, it’s unclear whether a single rate cut will fully restore the pre-sale market, and additional rate cuts may be necessary.
The U.S. Announces 25% Tariffs on Canadian Goods and the Impact
Trump’s tariff actions
On February 1, 2025, U.S. President Donald Trump announced a 25% tariff on all goods from Canada.
Eligible commodities include energy, manufactured goods, raw materials, and more.
This could result in the following economic impacts
- Reduced investment due to economic uncertainty
- Slower economic growth in Canada
- Canadian dollar (CAD) depreciation
- Increased inflationary pressures due to higher import prices
Tariff deferral and Canada’s retaliatory tariffs
On February 3, 2025, after negotiations with Canada and Mexico, the United States decided to suspend tariffs for one month.
Amidst this uncertainty, Canada is also looking to impose tariffs on U.S. goods in response to the U.S. tariff policy.
If this trade conflict continues, it could also have a negative impact on Vancouver’s real estate market, with fears of lower prices in the future.
How trade conflicts are impacting the pre-sale market
1. economic uncertainty has dampened buying sentiment
- As the impact of the trade conflict on the Canadian economy becomes more visible, consumer confidence is likely to decline.
- Some buyers will want to wait to see if the economy is stable before signing a sales contract.
2. rising construction costs
- The depreciation of the Canadian dollar in conjunction with the tariffs will likely increase the cost of imported construction materials (steel, electronics, etc.).
- Developers may raise pre-sale prices or delay projects due to increased raw material costs.
3. potential for increased foreign investment
- A decline in the value of the Canadian dollar could make Canadian real estate look more affordable to international investors.
- This may have a positive impact on some for-sale projects.
Vancouver’s residential sales market in 2025: Opportunities and risks
Who benefits
First-time homebuyers: Further rate cuts will likely lower the barriers to entry into the pre-sale market.
Foreign investors: Increased interest from international buyers due to the weaker Canadian dollar.
✔ Affordable housing developers: Wood-frame projects are likely to remain in demand due to relatively low construction costs.
Groups facing challenges
✖ Luxury condominium developers: Market uncertainty may slow demand for high-end housing.
Buyers who overextended themselves: If economic conditions deteriorate, they may have difficulty honoring their mortgages after signing a sales contract.
Construction industry: Rising commodity prices and increased labor costs may reduce project profitability.
What to watch for in 2025
1. whether the Bank of Canada will cut interest rates further
- Further rate cuts would have a positive impact on the pre-sale market.
2. the outcome of the Canada-U.S. trade talks
- If trade talks fail, economic uncertainty will likely increase, negatively impacting the real estate market.
- Successful negotiations could restore economic stability, which could lead to increased demand for real estate.
3. changes in foreign investment flows
- If the Canadian dollar continues to weaken, international investors are likely to increase their participation in the Vancouver sales market.
- Developers will need to ramp up their marketing strategies for foreign investors accordingly.
Conclusion: Vancouver’s pre-sale market at a crossroads
The Vancouver sales market in 2025 is expected to be mixed amid conflicting economic factors.
✅ Lower interest rates are likely to be a positive for home buyers.
✅ However, economic uncertainty due to trade conflicts could have a negative impact.
✅ A weaker Canadian dollar may encourage foreign investment inflows.
Going forward, interest rate policy, trade negotiations, and consumer confidence will be key factors in determining the direction of Vancouver’s condo market.
I think you should be cautious about investing in these conditions.