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Canadian Housing Market Struggles Amid Tariffs

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  Published in House and Home on Thursday, January 15th 2026 at 8:00 GMT by socastsrm.com

Thursday, January 15th, 2026 - The Canadian housing market, already grappling with persistent inflation and interest rate volatility, continues to feel the lingering effects of the unexpected tariffs imposed on imported building materials in late 2024. While 2025 saw a 1.9% decline in home sales - a figure initially reported by the Canadian Real Estate Association (CREA) - early indicators for 2026 suggest the market's recovery remains stubbornly slow.

The initial shock of the tariffs sent ripples through the construction sector and drastically altered the buying landscape. Lumber, steel, aluminum, and other crucial components of home construction saw significant price increases, effectively pushing up the cost of new builds and renovations. This wasn't just a problem for developers; it directly impacted prospective homeowners, making the dream of homeownership increasingly unattainable for a significant portion of the population. The tariffs were imposed seemingly without warning, a key factor in the subsequent market disruption, leaving builders and buyers scrambling to adjust to the new economic realities.

"The sudden implementation of the tariffs created a considerable degree of uncertainty," explains Eleanor Vance, a senior analyst at Sterling Economics. "It wasn't just about the price increase itself. It was the unpredictability. People hesitated to commit to new construction projects or significant renovations, and potential buyers put their plans on hold, waiting to see if prices would stabilize."

While CREA initially predicted a gradual recovery beginning in 2027 contingent on tariff adjustments, the data for the first few weeks of 2026 paints a less optimistic picture. Inventory remains elevated compared to pre-tariff levels, and sales volumes continue to lag behind historical averages. Price declines have been moderate thus far - largely attributed to the limited housing supply - but experts warn that sustained low sales could eventually lead to downward pressure.

"We're seeing a bifurcated market," notes Marcus Chen, a real estate broker specializing in the Greater Toronto Area. "Luxury properties are holding their value relatively well, catering to a segment less affected by the increased costs. However, entry-level homes and condos, the typical first-time buyer's market, are experiencing the most significant slowdown. Many potential buyers are simply priced out or are adopting a 'wait-and-see' approach."

The government, facing increasing pressure to address the housing affordability crisis, is reportedly reevaluating the tariffs. However, geopolitical considerations and trade negotiations complicate any potential adjustments. The original rationale behind the tariffs, ostensibly to protect Canadian industries and create domestic jobs, has been challenged by industry groups arguing that the unintended consequences - higher costs for consumers and a slowdown in the housing sector - outweigh any perceived benefits. There is now considerable debate within Parliament concerning whether the tariffs were a necessary evil or a short-sighted policy.

The ongoing impact extends beyond just the purchase of new homes. The renovation market, which fuels a substantial portion of the Canadian economy, has also been negatively affected. Smaller contractors and renovators are struggling to secure materials at reasonable prices, and many homeowners are postponing planned upgrades.

Looking ahead, the future of Canada's housing market hinges largely on the government's response to the tariff situation. A complete removal of the tariffs is seen by most economists as the most likely catalyst for a genuine market recovery. Even a partial reduction or a temporary suspension could provide a much-needed boost to consumer confidence and stimulate activity. However, the complex political and economic factors at play make a swift resolution unlikely. Until then, the Canadian housing market is expected to remain in a state of cautious equilibrium, a shadow of its vibrant pre-tariff self.

CREA's Chief Economist reiterated a call for policy intervention, stating, "The current situation underscores the importance of considering the broader economic consequences of trade policies. We urge the government to prioritize measures that support housing affordability and stimulate sustainable growth."