2025 Canadian Real Estate: A Strategic Confluence of Tax Reform and Market Revival

By Fahd Hasan MBA, CIP | 2-minute read

The Canadian real estate market stands at a compelling intersection of fiscal policy and market dynamics, presenting both challenges and opportunities for strategic investors. As we navigate through 2025, two significant forces are reshaping the investment landscape: the enforcement of new capital gains inclusion rates and an emerging real estate market renaissance.

The real estate sector is witnessing what Reid Taylor, Senior Vice-President of Capital Markets at Colliers Canada, describes as the "start of a new cycle." With borrowing costs declining and investor sentiment improving, the market is poised for increased activity across multiple sectors. Notably, necessity-based retail centers and multi-family properties are emerging as prime investment targets.

The Department of Finance has confirmed the continuation of new capital gains inclusion rates, increasing from 50% to 66.7% for gains exceeding $250,000. Despite Parliament's prorogation, these changes remain effective from June 25, 2024, with new filing requirements expected by January's end.

This evolving landscape creates a unique strategic environment. The residential market shows particular promise, with Royal LePage forecasting a 6% increase in overall home prices by year-end. Single-family homes are projected to appreciate by 7%, while regional markets display varying growth patterns, with Montreal leading at 6.5% aggregate growth. Institutional investment is regaining momentum, particularly in quality commercial assets. The office sector, while lagging, shows encouraging signs, especially in suburban markets and premium downtown properties.

For investors navigating this environment

• Timing becomes crucial for property dispositions given the new tax regime
• Portfolio diversification across asset classes offers risk mitigation
• Long-term hold strategies may warrant reassessment
• Value-add opportunities become increasingly attractive

Looking forward, the convergence of tax reform and market recovery creates a sophisticated investment environment requiring careful navigation. Success in 2025 will depend on strategic positioning that accounts for both policy changes and market dynamics.

????: Fahd Hasan MBA, CIP

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