Trade deal could give stagnant housing market a boost, but the list of unknowns remains long

The real estate market may have caught a break: a potential trade deal with America’s Tariff Don appears to be taking shape.

The less welcome news is that the real estate market still faces a long list of unknowns.

Bank of Canada staff research estimates that in the median Canadian city, a one per cent rise in housing demand pushes prices up roughly 0.45 per cent.

But economic uncertainty has been a persistent problem. Among Canadians looking to purchase a home last year, Royal LePage found that 49 per cent said the ongoing trade dispute with the U.S. had caused them to postpone their home-buying plans.

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Whatever the exact figure, tens of thousands of buyers went on strike, doubtful about spending six or seven figures on a home amid so much market uncertainty.

With the tariff clouds beginning to clear (assuming the deal is signed) and employment already improving, the labour market could receive a further boost, which usually generates additional real estate demand.

Good economic news can eventually put upward pressure on borrowing costs.

If a workable trade deal is finalized by Saturday’s deadline, Canada should see more investment and employment, all other things equal.

That tends to be inflationary, something that keeps interest rates higher than they’d otherwise be.

Mind you, it’s possible that as job growth improves housing demand, rising rates pull it the other way.