How the U.S. Tariffs Could Impact Canada's Housing Market

​The recent imposition of 25% tariffs by the United States on Canadian imports is expected to have notable implications for the real estate market in Simcoe County. These tariffs, effective from March 4, 2025, are anticipated to increase construction costs, influence housing affordability, and affect investor sentiment in the region.​

Impact on Construction Costs in Simcoe County

Bull Case

The tariffs are projected to raise the prices of essential building materials, including steel and aluminum, which are integral to residential construction. This escalation in material costs could lead to higher expenses for new construction and renovation projects within Simcoe County. Consequently, developers may face challenges in maintaining profitability, potentially resulting in reduced housing supply and increased property prices. 

Bear Case

On the flip side Simcoe County boasts a diverse and innovative manufacturing industry, with companies producing goods across various sectors, including automotive, aerospace, and advanced manufacturing. Notably, Barrie's fabricated metal manufacturers export goods across Canada and into the U.S., Mexico, and European markets. Additionally, Honda of Canada Manufacturing (HCM), located in Simcoe County, produces vehicles sold in Canada and exported to the United States. ​

The newly imposed tariffs are expected to increase the cost of exporting these products to the U.S., potentially making them less competitive in the American market. This scenario could lead to a decrease in demand for locally manufactured goods, adversely affecting production volumes. Consequently, manufacturers may face financial pressures that could result in workforce reductions. For instance, the President of Unifor Local 444 has expressed concerns that the 25% tariff will be devastating for auto manufacturing, leading to production slowdowns and potential layoffs.

Effects on Housing Affordability

As construction costs rise, these expenses are often transferred to homebuyers and renters, exacerbating existing affordability issues in markets like Simcoe County. Higher home prices could deter potential buyers, leading to a slowdown in market activity in the new build sector.. Additionally, increased costs in the rental market may strain tenants, particularly in urban areas where demand remains high. The Toronto Regional Real Estate Board (TRREB) has noted that external factors, such as potential U.S. tariffs, could impact consumer confidence and housing demand. 

Influence on Investor Sentiment

The tariffs introduce economic uncertainties that may affect investor confidence in Simcoe County's real estate sector. Concerns about escalating construction costs and potential delays in projects could lead to more cautious investment strategies. However, certain sectors, such as real estate, might perform better due to escaping the direct tariff impacts or benefiting from a weaker Canadian dollar and lower interest rates. ​

Bank of Canada's Interest Rate Cuts and Mortgage Implications

In response to economic challenges, including those posed by U.S. tariffs, the Bank of Canada has implemented interest rate cuts to stimulate economic activity. On January 29, 2025, the Bank reduced its target for the overnight rate to 3%, marking the fourth consecutive rate cut. Lower interest rates can lead to reduced borrowing costs for consumers, making mortgages more affordable and potentially boosting demand in the housing market. The Bank's decision is absorbed by lenders, variable mortgage rates will fall, providing relief to homeowners with variable-rate mortgages. Fixed rates are dependent on broader economic outlook and tend to follow suit. 

Decline in 5-Year Bond Yields

As of March 3, 2025, 5-year Government of Canada bond yields have reached a three-year low. This decline is significant because fixed mortgage rates are closely tied to these bond yields. Lower bond yields can lead to decreased fixed mortgage rates, offering more favorable borrowing conditions for prospective homebuyers in Simcoe County. Fixed mortgage rates have already started to drop after the Bank of Canada began cuts in June of 2024, and it is expected that rates will continue to decrease.

Parker Coulter Realty's Role in Navigating These Challenges

At Parker Coulter Realty, we understand the complexities that such economic shifts introduce to the real estate market in Simcoe County. Our team is committed to providing clients with informed guidance to navigate these challenges effectively. Here's how we can assist:

• Expert Market Analysis: We offer up-to-date insights into market trends, helping clients make informed decisions about buying, selling, or investing in properties.
• Strategic Planning: Our advisors work closely with clients to develop strategies that mitigate risks associated with increased construction costs and market volatility.
• Comprehensive Services: As a full-service brokerage, we provide all the tools and exceptional service necessary to sell your home, ensuring you get the best possible return on your investment.

In these uncertain times, partnering with a knowledgeable and experienced real estate firm like Parker Coulter Realty can provide the assurance and expertise needed to navigate the evolving landscape of Simcoe County's real estate market.