This is for educational purposes only; it does not guarantee future performance or serve as financial or tax advice.
The Bank of Canada just released its April 2025 outlook in their latest monetary policy report, and this time, it’s not making bold calls like we saw during COVID when it said rates would stay low “for a long time.” That move backfired—and they’ve clearly learned from it. Instead, the BoC is taking a more cautious, realistic approach, laying out two scenarios that reflect how much damage the current US trade mess could cause. And spoiler alert—neither option looks particularly good, which has real implications for investors, especially in real estate.
In both the optimistic and pessimistic cases, the Bank has lowered its growth forecasts for 2025 and 2026 compared to January. Even though inflation is cooling and the economy is softening, there’s a lot of global risk in play, and they’re adjusting their interest rate strategy accordingly. So if you’re investing—or thinking about investing—in Canadian real estate, especially in cities like Toronto, this is the kind of macroeconomic shift you need to pay attention to.
Scenario 1: The “Less Ugly” Outlook
In this first scenario, some US tariffs are rolled back, but trade policy stays shaky through 2026. That ongoing uncertainty makes both consumers and businesses cautious. Spending slows down, investments dip, and the Canadian dollar averages around 70 cents USD. It’s not a crash, but it’s definitely a soft landing with turbulence.
In this version, Canada’s GDP briefly stalls in mid-2025, then picks up slightly with 1.6% growth through 2027. Inflation dips under 2% in 2025, thanks in part to a cut in the federal carbon tax, which helps lower energy costs. It then stabilizes around 2% in the years that follow. Even though we’ll see some price spikes in non-essentials—thanks to Canadian tariffs and a weaker loonie—overall, inflation stays under control.
For real estate investors, this is actually a fairly workable market. Lower inflation gives the Bank of Canada more breathing room to hold or even cut rates, which brings down borrowing costs. That doesn’t mean buyers will flood the market—consumer sentiment is still cautious, and rent growth remains slow. But here’s the upside: new construction is slowing, which means future housing supply will tighten. If you’re buying with a long-term view and prioritizing cash flow, this market is actually full of opportunity. Right now, cash flows on Toronto multiplexes are stronger than they’ve been in over a decade, and long-term demand remains solid thanks to real homebuyers and stable rental demand.
Scenario 2: The “Full-On Trade War”
This second scenario is much worse. The US goes all in with tariffs, triggering a full-blown global trade war. Growth slows even more—Canada slips into a full-year recession, and the recovery is slow, with GDP reaching just 1.8% by 2027. The Canadian dollar takes a bigger hit, dropping to an average of $0.67 USD.
Inflation behaves differently here. It stays near 2% until early 2026, thanks to the carbon tax cut and weak demand, but then spikes over 3% as tariffs and a weaker currency push costs up. That’s textbook stagflation: low growth, high inflation.
In this scenario, real estate gets trickier. The Bank of Canada might not be able to lower rates further—and could even have to raise them again. That makes the market more volatile. It’s definitely not the time to flip properties. Short-term wins can vanish fast in this kind of environment. Long-term rentals still make sense, but cash flow might get tighter if interest rates or operating costs climb. If you’re nervous about rate swings, now’s the time to lock in a fixed rate. And make sure you stress-test for slower rent growth and rising expenses.
Stick to strong, stable markets. Toronto still stands out—thanks to a strong job base, schools, transit, and steady demand from both renters and end users.
The Bottom Line: Stick to the Fundamentals
No matter which scenario plays out, your best move is to stay focused on the fundamentals. That means cash flow. Right now, Toronto multiplexes are producing the best cash flows we’ve seen in years—possibly the best in over a decade. And with interest rates still relatively high and other investments offering lower yields, real estate in this market is looking more attractive.
Even if prices move up or down in the short term, many properties already make sense just based on rental income. And with fewer new homes being built and solid long-term demand, there’s still strong upside ahead. If the numbers work today, you’re in a great position for long-term gains.
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And if you’re looking for opportunities like this in Toronto, that’s where we come in. At Elevate Realty, we help investors find high-performing multiplex properties backed by real data. Whether you’re after a turnkey property or want to take on a value-add renovation, we’ve got you covered. From finding the deal to helping with renovations, leasing, and even property management—we’re here every step of the way.
Whether you’re after a turnkey property or something to convert, we’ll be by your side. Let’s make sure you’re making the best decisions for your future!
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- Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
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- Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll coach you as you manage the project.
- Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.
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