Canada’s 2025 Federal Budget: Implications for the Real Estate Market

Aman Sethi, Realtor | Published: November 5, 2025 | Toronto

The 2025 federal budget represents one of the most consequential housing policy shifts in recent Canadian history. With affordability challenges dominating public discourse, the Government of Canada has unveiled a suite of measures aimed at accelerating housing construction, easing costs for first-time buyers, and stabilizing the rental market. The plan, which builds upon prior housing strategies, combines tax incentives, financing reforms, and public-sector intervention to address Canada’s chronic housing shortage. This analysis examines the proposed initiatives and their likely impacts on the Canadian real estate landscape, from affordability and supply to employment and long-term investment trends.

Expanding Housing Supply: An Ambitious but Difficult Goal

A central pillar of Budget 2025 is a national commitment to dramatically increase housing supply. The federal government has pledged to support the construction of 500,000 new homes by 2031, an initiative it deems essential for restoring balance to Canada’s housing market (Government of Canada, 2025). This aligns with broader estimates from the Canada Mortgage and Housing Corporation (CMHC), which suggest that millions of additional housing units are needed to bring affordability back to pre-pandemic levels.

To achieve this, the government will expand financing access through the Canada Mortgage Bond (CMB) program, increasing its annual limit from $60 billion to $80 billion. This move is expected to make borrowing cheaper for developers of multi-unit rental projects (Government of Canada, 2025). While this could help stimulate new construction, the Globe and Mail reports that the housing industry remains skeptical about whether such measures can be implemented fast enough to offset Canada’s structural constraints, such as labour shortages and high material costs (GlobeNewswire, 2025). The Canadian Home Builders’ Association (CHBA) warned that while the promise of half a million new homes is laudable, the cost of compliance and potential job losses could offset the benefits if not properly managed (GlobeNewswire, 2025).

Ultimately, while the government’s ambition to boost supply is clear, execution risks remain high. Even with enhanced financing tools, the speed of project approvals, zoning reforms, and skilled-trade availability will determine whether this supply target can realistically be met.

First-Time Homebuyer Relief and Market Demand

One of the most widely discussed aspects of Budget 2025 is the elimination of the Goods and Services Tax (GST) on new homes priced up to $1 million and a partial rebate for those between $1 million and $1.5 million (Government of Canada, 2025). This policy directly targets affordability for first-time homebuyers — a demographic that has been largely priced out of the market due to rising interest rates and stagnant wages.

By removing the GST from new housing, the government hopes to stimulate demand in the new-home market while simultaneously incentivizing builders to increase production. However, economists have noted that such demand-side relief can have mixed outcomes. According to Scotiabank Wealth Management (2025), while tax reductions improve affordability in theory, they may also lead to short-term price increases if supply does not expand quickly enough to absorb heightened demand.

In the short term, this measure is expected to generate renewed interest in new-home construction and pre-construction purchases, particularly in urban centers like Toronto, Vancouver, and Ottawa. Over the medium term, however, without significant acceleration in building completions, the policy risks pushing up land and development costs — partially negating its affordability objectives.

Rental Housing and the Push for Institutional Investment

Beyond ownership, Budget 2025 introduces several measures to expand the availability of purpose-built rental housing. The government’s decision to raise the CMB limit and create new financing channels through the Canada Infrastructure Bank (CIB) aims to encourage institutional investors and pension funds to back rental construction projects (Government of Canada, 2025).

These steps reflect a growing recognition that the private market alone cannot resolve Canada’s rental crisis. Vacancy rates across major metropolitan areas remain below 2%, and average rents have risen sharply in both the condominium and purpose-built segments. With limited supply and surging demand from population growth and immigration, affordability in the rental sector has deteriorated dramatically over the past decade.

By improving access to low-cost financing, Ottawa hopes to make multi-unit development more financially viable. However, analysts at Scotiabank (2025) caution that while this will aid long-term supply, it could initially strain public finances and crowd out smaller developers. The challenge lies in ensuring that new capital inflows translate into tangible, affordable rental stock rather than luxury or investor-focused projects.

Public-Land Development and Build Canada Homes

Another significant initiative introduced in the 2025 budget is the creation of Build Canada Homes (BCH), a new federal agency that will coordinate housing construction on public lands. The agency will receive $13 billion in funding over five years to build affordable and non-market housing through partnerships with private and non-profit organizations (Government of Canada, 2025).

This marks a return to direct public involvement in housing delivery — a model not seen at this scale in decades. BCH will focus on leveraging federally owned lands for housing construction and on streamlining procurement to reduce costs. If implemented efficiently, this could help bypass some of the bureaucratic hurdles that have slowed private-sector development.

However, industry observers have noted potential risks. The Globe and Mail reported that while large-scale federal involvement could speed up housing delivery, it may also lead to inefficiencies if government agencies cannot execute at the pace of private developers (GlobeNewswire, 2025). Furthermore, increased government competition for construction labour and materials could drive up costs in the broader market, counteracting the intended affordability benefits.

Broader Economic Implications

The housing strategy embedded in Budget 2025 represents a major economic gamble. According to Scotiabank (2025), the total fiscal cost of the government’s housing and infrastructure commitments exceeds $50 billion over the next five years, potentially adding pressure to the federal deficit. The report also notes that the combination of high spending and persistent inflation risks could force the Bank of Canada to delay further rate cuts, indirectly affecting mortgage affordability.

At the same time, construction-industry stakeholders have expressed concern that the push for affordability could lead to job losses if policies like carbon pricing and regulatory tightening make projects less profitable (GlobeNewswire, 2025). The interplay between fiscal stimulus and employment displacement underscores the complexity of reforming Canada’s housing market in a high-cost environment.

Conclusion

Canada’s 2025 federal budget represents an ambitious attempt to tackle one of the country’s most pressing social and economic issues — housing affordability. Its mix of tax relief, financing expansion, and public-sector construction initiatives signals a structural shift in federal housing policy. Yet, the success of this strategy will depend heavily on implementation: the ability to mobilize skilled labour, coordinate with provincial and municipal partners, and deliver projects efficiently.

If executed well, these measures could lay the groundwork for a more balanced and accessible real estate market over the next decade. But if bottlenecks persist and costs continue to rise, Canada risks another cycle of policy promises falling short of transformative change.

References

GlobeNewswire. (2025, October 30). Housing industry responds to Budget 2025: From a promise of 500,000 new homes to a plan that will cost 100,000 jobs. The Globe and Mail. https://www.theglobeandmail.com/investing/markets/markets-news/GlobeNewswire/35915015/housing-industry-responds-to-budget-2025-from-a-promise-of-500-000-new-homes-to-a-plan-that-will-cost-100-000-jobs/

Government of Canada. (2025). Budget 2025: Chapter 3 – Empowering Canadians. https://budget.canada.ca/2025/report-rapport/chap3-en.html#a1

Scotiabank Wealth Management. (2025, November 5). 2025 Federal Budget Summary. https://enrichedthinking.scotiawealthmanagement.com/2025/11/05/2025-federal-budget-summary/