The Bank of Canada announced their decision today to hold interest rates, backed by a resilient labour market and sticky inflation around 3%, reflects cautious optimism, though trade war uncertainties and potential tariff hikes loom. Despite a sluggish Ontario real estate market, RE/MAX reports that 23% of Toronto and Vancouver communities are seeing stable or rising detached home sales, with hotspots like South Parkdale and The Beaches driving up to 56.6% sales increases, fueled by affordable prices and limited supply in high-end areas. Concurrently, Toronto’s population and economic growth are straining its energy infrastructure, prompting the Ontario government and City of Toronto to plan a third electricity transmission line to support new housing, transit projects like the Ontario Line, and developments like the Port Lands. With buyers re-entering the market and infrastructure investments underway, this newsletter delves into how these trends signal opportunities for brokers and real estate professionals to navigate Toronto’s evolving landscape.

BOC comfortable with where rates are now

The Bank of Canada announced today that they are maintaining the current policy rate, driven by sticky core inflation around 3%, influenced by tariff-related price increases in clothing and autos. Some businesses are absorbing these costs to maintain market share, but vigilance remains due to potential delayed consumer price impacts. Canada’s resilient labour market, with June’s unemployment rate dropping to 6.9% from 7% and 83,000 jobs added (mostly part-time), supports the decision to hold rates. Economic growth in Q1 2025 outperformed expectations due to businesses stockpiling inventory ahead of tariffs, but Q2 growth is nearly flat, with April and May GDP contracting by 0.1%. The Bank of Canada’s scenarios project growth stalling at 1.6% through 2027 if a trade deal lifts tariffs, or a four-quarter GDP contraction averaging -1.2% in a prolonged trade war. Ongoing U.S.-Canada talks aim for an economic and security deal, but sectoral tariffs on autos, steel, and aluminum persist, with potential increases to 35% on non-exempt goods under CUSMA by late July 2025. A stronger Canadian dollar may help curb import prices, potentially easing inflation later in 2025. Economists anticipate rate cuts resuming in September, with expectations of two cuts by year-end, though strong job reports could alter this outlook. The trade war remains the primary uncertainty for monetary policy, with potential retaliatory tariffs influencing future inflation expectations.

GTA Neighborhoods on the rebound

Toronto’s real estate market is showing signs of recovery in 2025, with detached homes leading the charge, according to RE/MAX’s Hot Pocket Communities Report. Despite a sluggish market with GTA home sales hitting record lows, 23% of 83 communities in Toronto and Vancouver saw stable or rising detached home sales, with 19% reporting price increases. Downtown Toronto’s 416 area is a hotspot, with 34% of neighborhoods showing robust activity. Key areas like South Parkdale, Roncesvalles, and High Park-Swansea (up 56.6%), Yonge-St. Clair, Casa Loma, and the Annex (up 31.3%), and The Beaches (up 27%) are driving sales. Price growth was strongest in Waterfront Communities and Moss Park (up 21.5%) and Bridle Path-Sunnybrook (up 11.5%). While condo demand remains weak, detached homes benefit from more affordable prices and perceived limited supply, particularly in high-end neighborhoods less affected by economic pressures. RE/MAX notes that buyers, previously sidelined, are now re-entering, often with sales contingent on selling existing properties, signaling cautious optimism.

Toronto continues to grow rapidly

The Ontario government and City of Toronto are collaborating to develop a third electricity transmission line to meet Toronto’s growing energy demands, driven by new housing, economic growth, and major infrastructure projects like the Ontario Line. With the city’s electricity needs expected to double by 2050, particularly in the downtown core, the current two transmission paths—Manby Transmission Station in the west and Leaside in the east—will reach capacity by the early 2030s. The Independent Electricity System Operator (IESO) has confirmed the need for a third line after extensive technical analysis and public engagement. Three options are under consideration: an overland route from Pickering to Leaside using existing corridors, an overland route from Pickering to the Port Lands with possible underground segments, or an underwater cable from Darlington or Pickering to the Port Lands via Lake Ontario. These options aim to minimize land-use impacts. The IESO will engage further with the City of Toronto, Indigenous communities, and stakeholders this summer to finalize a recommendation by August 2025. Construction could take seven to ten years, highlighting the urgency of starting now. Alongside the transmission line, the IESO is exploring complementary solutions like small-scale generation, rooftop solar, battery storage, and enhanced energy efficiency programs to manage peak demand and reduce reliance on natural gas. This initiative is part of Ontario’s upcoming Integrated Energy Plan, which focuses on long-term energy security, economic growth, and positioning the province as a competitive destination for investment while supporting major projects like the Port Lands and East Harbour developments.