The Orange Man's Impact

In early February 2025, the Trump administration announced a 25% tariff on Canadian imports,

including essential construction materials such as steel and aluminum. This policy shift has significant implications for Ontario's real estate market, potentially affecting construction costs, housing affordability, and market dynamics.

Rising Construction Costs

The imposition of tariffs on steel and aluminum is expected to increase the cost of these materials, which are fundamental to residential and commercial construction. The Ontario Home Builders' Association (OHBA) has expressed concern that these increased material costs will lead to higher overall construction expenses, subsequently raising the prices of new homes for buyers. This escalation in costs could also result in delays or cancellations of planned developments, further tightening the housing supply in the province.

Impact on Housing Affordability

Higher construction costs are likely to exacerbate existing affordability challenges in Ontario's housing market. As developers face increased expenses, these costs are often passed on to consumers, making homeownership more difficult for many Ontarians. Additionally, the potential for economic slowdown due to tariffs may lead to decreased investment in residential real estate and fewer housing starts, undermining efforts to increase housing supply and improve affordability.

Potential for Higher Mortgage Rates

The tariffs could also influence mortgage rates. Increased costs for goods and services may lead to inflationary pressures, prompting the Bank of Canada to consider raising interest rates to manage inflation. Higher interest rates would directly impact mortgage rates, increasing borrowing costs for homebuyers and potentially cooling demand in the housing market.

Market Uncertainty and Economic Implications

The introduction of tariffs introduces a layer of uncertainty into Ontario's real estate market. Potential economic turbulence could unsettle both buyers and sellers, leading to a more cautious approach in the market. Sectors heavily reliant on exports, such as manufacturing and natural resources, could face significant job losses, disproportionately affecting specific regions and, by extension, their housing markets.

Government and Industry Responses

In response to the tariffs, Ontario Premier Doug Ford announced measures to ban contracts with U.S. companies, including canceling a $68 million agreement with Elon Musk's Starlink. This move aims to protect Ontario's economic interests and mitigate the impact of U.S. tariffs on the province's economy.

The real estate industry, represented by organizations like the OHBA, is advocating for strategies to minimize the negative effects of tariffs on housing. This includes calls for excluding construction materials from retaliatory tariffs and seeking collaborative solutions to maintain housing affordability and supply.

Conclusion

The imposition of U.S. tariffs on Canadian imports presents significant challenges to Ontario's real estate market. Stakeholders, including government officials, industry leaders, and consumers, must navigate this complex landscape to address rising construction costs, potential increases in mortgage rates, and overall market uncertainty. Collaborative efforts and strategic policy responses will be essential to mitigate the adverse effects on housing affordability and ensure the stability of Ontario's real estate sector.