Is The Southern Ontario Real Estate Market
at Risk From U.S. Tariffs?

The Southern Ontario real estate market is deeply interwoven with Canada’s economic performance, particularly in trade-centric industries like manufacturing and automotive. With nearly one million jobs tied to U.S.-Canada trade, the implementation of broad U.S. tariffs on Canadian imports has the potential to ripple through our housing market. This week we explore some of the impacts on the local real estate market if tariffs are imposed.

1. Economic Disruptions and GDP Impact

Broad U.S. tariffs—estimated at 25% on Canadian imports—could result in a contraction of up to 3.25% in Canada’s GDP, as suggested by recent CIBC findings. Southern Ontario, a hub for manufacturing industries heavily reliant on U.S. trade, faces significant exposure.

2. Potential Increase in Construction Costs

Tariffs on Canadian imports could also lead to an increase in construction costs for new homes and developments. Many building materials such as lumber, steel, and aluminum are imported from Canada and then shipped back to Canada as finished products to be used in construction. A sudden hike in tariffs could drive up prices significantly. This could have a direct impact on housing prices although it likely wouldn’t be immediate.

3. Uncertainty in the Market

The implementation of tariffs can create uncertainty in the real estate market as buyers, sellers and investors may hold back on making large purchases or investments until there is more clarity on how the trade situation will play out.

When economic activity slows, consumer spending declines. Industries influential in the region’s economy, such as automotive and manufacturing, are likely to experience job losses, reducing disposable household income. With fewer qualified buyers in the market, housing demand could decline, creating downward pressure on prices, particularly in higher-end sections of the market.

Adding to the complexities is the ripple effect on consumer confidence. Prospective buyers may delay major financial decisions, including home purchases, when economic uncertainty looms. This “wait-and-see” approach could cause transaction volumes to stagnate across the local and Ontario real estate markets.

Effects on Key Sectors

Automotive and Manufacturing

Southern Ontario’s automotive and manufacturing industries are vital economic pillars. U.S. tariffs could disrupt established supply chains, leading to reduced production. Layoffs in these sectors would stifle the income of families who might otherwise be active homebuyers, making homeownership less accessible.

Short and Long-Term Real Estate Implications

Short-Term

Reduced Buyer Demand

Job losses and economic slowdowns would reduce purchasing power, decreasing the number of active buyers.

Medium-to-Long-Term

Shifts to the Rental Market

Reduced housing affordability could propel more people into rental housing, increasing demand for rentals and stabilizing rental prices or even driving increases.

Market Sentiment Dip

Fewer transactions are expected as nervous buyers and sellers hold off on making moves amidst looming uncertainty. This property market stagnation could exacerbate volatility in housing prices.

Broader Economic Uncertainty

Economic uncertainty undermines both consumer and business confidence. If retaliatory tariffs are implemented by Canada, inflationary pressures could dilute disposable income, further dampening homebuying potential. The erosion of confidence could hinder both new real estate investments and renovation efforts by existing homeowners.

Currency Depreciation Impacts

A weaker Canadian dollar may partially offset some of the trade impact by making Canadian goods more affordable for U.S. buyers. However, this depreciation would simultaneously inflate the price of imported goods, like appliances and other goods frequently associated with new homes and home purchases. For homebuyers, this could result in higher costs for new builds or renovations, creating added barriers to entry into the housing market.

The Bottom Line

The imposition of broad U.S. tariffs on Canadian imports would send shockwaves through Southern Ontario’s economy, with real estate standing as one of the most vulnerable sectors. Reduced employment in critical industries, climbing construction costs, and destabilized consumer sentiment would create significant headwinds for homeownership and housing market stability.

For homeowners, this could mean slower appreciation in home values or even short-term declines. Homebuyers may encounter mixed conditions, with fewer listings available but potential price softening in certain markets.

Will these tariffs be introduced or is this a negotiating tactic, much like ones we’ve seen from Trump’s first term as president, where the goal is to extract concessions from countries like Canada and Mexico around existing trade agreements? He’s also threatened most of Europe with similar tariffs in order to persuade the EU to buy more American goods and spend more on their militaries.

It will be interesting to see how this evolves over this year and the next 4 years of Trump’s term. The Canadian dollar has been bouncing around considerably since the US election and there has been a lot of political speculation on how this country will handle any increased tariffs. History suggests that Trump’s bully tactics will continue as he looks for wins for him personally and the US secondly as it does have some impact. However, a considerable amount of Trump’s threats and bluster is more theatre than actual action. For the Guelph real estate market I don’t believe this will be an existential threat. People will continue to buy, sell and invest for many reasons and for some of those reasons will be a result of economic conditions beyond our control.

I prefer to take a Warren Buffet view of this potential situation that when everyone is being fearful, it’s time to start looking for opportunities. As always I’m happy to dig into the details and answer any questions you may have.

My calendar link for a no obligation consultation is here: Book a 30 min consultation

Have a great weekend,

Paul

Appointment Calendar: https://calendly.com/homegrouprealty

Want to search for opportunities in your area?

Search for Homes Here

LISTING OF THE WEEK

64 Gaw Crescent, Guelph

$959,900

Detached 2 Storey
3 Bedrooms, 1.5 Baths
1,342 sqft
4 Parking Spaces

Welcome to 64 Gaw Crescent, nestled in the highly sought-after Pineridge/Westminster Woods neighbourhood in the south end of Guelph!
This charming home offers over 2000 sqft of inviting living space. The open concept main level has a beautiful spacious kitchen, boasting timeless Barzotti cabinets and a convenient sit-at island, ideal for a quick meal or additional prep space for cooking. The bright & airy living room is a welcoming space, highlighted by a large window that floods the room with natural light. Complete with an area for formal dining you are also able to step out to your quaint enclosed back porch, where you can enjoy your morning coffee or unwind after a long day while taking in breathtaking views of the professionally landscaped backyard oasis. This space is perfect for outdoor entertaining, featuring an in-ground, free-form pool, a covered cooking area with a natural gas BBQ, a generous storage shed for all your gardening tools & toys, and a privacy lattice for added seclusion.

Learn more