The real estate market has been impacted by a series of economic forces, with the latest major concern in 2025 being the renewed threat of U.S.-imposed tariffs in Canada. The uncertainties surrounding this economic threat has the potential to disrupt Canada’s housing sector in both the pre-construction and resale markets.

From rising construction costs to shifting buyer confidence, tariffs introduce uncertainty that affects home prices, investment decisions, and overall economic stability. As a law firm advising real estate developers, investors, and homebuyers, we believe understanding these challenges and being vigilant of the economic climate help us to serve you best. This article explores the impact of tariffs on the pre-construction and resale markets, as well as the potential legal responses that could equip you to navigate the future of Canadian real estate.

Tariffs and Their Impact on Pre-Construction Properties

New Home Builders: Rising Construction Costs and Project Delays

The introduction of a 25% tariff on Canadian steel and aluminum by the U.S. is expected to rattle the pre-construction housing market. These materials are essential in building homes, condominiums, and commercial properties, and any increase in their costs will trickle down to developers, contractors, and ultimately, homebuyers.

Industry leaders, including the Ontario Home Builders’ Association, have voiced concerns about the potential for tariffs to increase the cost of new home developments. As the preconstruction market is already suffering with rising construction costs, a glut of unsold units from previous development booms, and a shift in investor interest, these additional trade barriers could be a brutal blow. Developers working on tight margins may find it increasingly difficult to keep projects alive with the increase in the price of construction materials, leading to potential delays, cancellations, or reductions in housing supply.

New Home Buyers: Affordability and Housing Supply Concerns

Canada is already experiencing a housing affordability crisis, with home prices—particularly in major cities like Toronto and Vancouver—remaining out of reach for many homebuyers. In 2022, only 17% of potential homebuyers cited affordability as a barrier; by 2023, that number nearly doubled to 33%. The added financial burden from tariffs could make it even harder for developers to build homes at affordable price points.

Higher construction costs often lead to higher listing prices for new homes and condos, particularly in urban centers where demand is already high. Additionally, developers may scale back on affordable housing projects in favor of luxury developments, where profit margins are more secure, and they are guaranteed to have buyers who could afford their properties. This could further exacerbate housing supply shortages and push more buyers into the already competitive resale market.

Tariffs and Their Impact on the Resale Market

Price Volatility and Buyer Uncertainty

Unlike pre-construction developments, the resale market is not directly dependent on raw construction materials. However, the indirect effects of tariffs can still have significant consequences for homebuyers and sellers.

If construction slows due to rising costs, the shortage of newly built homes may push more buyers into the resale market, increasing demand and potentially driving prices higher. However, at the same time, economic uncertainty surrounding tariffs could weaken buyer confidence, leading some buyers to delay their purchasing decisions.

While some expected a slight uptick in buyers demand this year, concerns over U.S.-Canada trade tensions and potential job losses in manufacturing sectors have kept many buyers on the sidelines. If tariffs lead to layoffs in industries reliant on exports, demand for housing could decline sharply.

Investor Sell-Off and Rising Condo Inventory

Another notable trend is the surge in condo listings, with January 2025 setting an all-time high for new condo listings in Toronto. Investor confidence appears to be shaken, as more property owners look to exit the condo market.

The numbers tell the story:

• New condo listings jumped 41% year-over-year, while active listings more than doubled compared to the historical average.
• Active condo listings surged to 6,913 in January 2025, more than doubling the historical average of 3,176.
• The months of inventory (MOI) for condos increased to 5.8, signaling a shift toward a buyer’s market.
• The average condo price dropped by 1% from last year, suggesting softening demand despite growing supply.

For investors, the existing combination of stagnant prices, a falling rental market, and high carrying costs met with exacerbated economic uncertainties may prompt further sell-offs. This trend could create short-term downward pressure on prices, especially in a market that is already oversaturated with condos.

Navigating Legal Challenges for Homeowners and Homebuyers – We can help!

For homeowners, buyers, and investors, Toronto’s real estate landscape is evolving rapidly due to recent economic uncertainties. As reliable real estate lawyers, we seek to help clients anticipate and mitigate the potential legal risks in an increasingly complex market.

Pre-Construction Agreement of Purchase and Sale – Review and Amendment

Many buyers who secured pre-construction condos years ago are now facing unexpected challenges. Developers, grappling with rising construction costs due to tariffs on materials, may attempt to revise purchase agreements to pass these costs onto buyers. If you are a pre-construction buyer facing additional charges or contract modifications, our real estate lawyers will help you by:

• Assessing whether the developer’s amendments are legally enforceable.
• Meticulously reviewing condo agreements to identify and propose amendments for unfair cost escalations.
• Ensuring your rights are protected in the event of project delays or cancellations.

Mortgage Renewal Risks: Protecting Homeowners from Financial Strain

As mortgage rates fluctuate in response to economic conditions, homeowners renewing their mortgages in 2025 may face higher borrowing costs and tighter lending conditions. Those experiencing financial strain may be at risk of forced sales or distressed transactions. Our legal experts assist homeowners by:

• Reviewing mortgage agreements to identify potential lender flexibility.
• Advising on legal options for avoiding foreclosure or forced sales.
• Negotiating alternative solutions with lenders to prevent financial hardship.

Resale Market Challenges: Managing Contract Disputes

A volatile market often leads to disputes between buyers and sellers in resale transactions. Price renegotiations, financing difficulties, and changing market conditions may result in contract breaches or legal conflicts. Our firm provides legal expertise to:

• Represent buyers or sellers in breach-of-contract disputes.
• Ensure fair enforcement of financing conditions and deposit recoveries.
• Handle complex negotiations when transactions face unexpected delays or cancellations.

With volatile economic conditions, strategic legal guidance is more important than ever for those buying, selling, or refinancing property. If you need assistance with any real estate transaction, whether it’s the purchase, sale, refinance, or assignment of your properties, our firm is here to help ensure that you are legally protected and take the best steps forward.

Conclusion

As economic conditions continue to evolve, tariffs, supply chain disruptions, and responding legislative changes will have a profound impact on Toronto’s real estate market. Buyers, sellers, investors, and developers must make informed decisions and take proactive legal steps to safeguard their interests. Whether it’s renegotiating pre-construction agreements, resolving contract disputes, or addressing mortgage challenges, having reliable legal expertise is essential in navigating these complexities.

At Bradshaw & Mancherjee, we provide strategic legal guidance to help our clients anticipate risks, protect their investments, and ensure compliance with evolving regulations. Our team is dedicated to offering tailored solutions for every stage of your real estate transaction, from contract negotiation to dispute resolution.

If you want to take proactive steps to protect your property amid tariffs and related regulatory shifts that may affect your property or investment, contact us today for a consultation. Let us help you make informed, confident real estate decisions in a rapidly changing real estate market.

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