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Vancouver and Seattle: Which Market Will Win in a Tariff-Driven Economy?

Writer's picture: Praedia Real Estate GroupPraedia Real Estate Group

Updated: 2 days ago

Tariffs, Real Estate, and You: Vancouver and Seattle?


Tariff Economy
Tariff Economy

With new US-to-Canada tariffs planned for February 4, 2025 now postponed for 30 days, the real estate markets in Vancouver, BC, and Seattle, WA, are poised for significant shifts. These tariffs, which will impact key construction materials like lumber, steel, and aluminum, could create very different outcomes for the two cities. For developers, investors, and homebuyers, understanding these potential changes is critical. Let’s explore how these tariffs might play out and which market could come out on top.


1. The Future Impact of Tariffs on Construction Costs

Once the tariffs take effect in 2025, US developers in Seattle are likely to face higher costs for lumber, steel, and aluminum, as Canada is a major supplier of these materials to the US. This could lead to increased construction expenses, making it more challenging to launch new projects. On the other hand, Vancouver developers will benefit from Canada’s domestic supply chain, which will remain largely unaffected by the tariffs. With more stable material costs, Vancouver’s construction industry will be better positioned to maintain momentum, giving the city a competitive edge in the real estate market.


2. Cost Implications for Developers in 2025 and Beyond

In Seattle, the planned tariffs could squeeze developer profit margins, as higher material costs will likely be passed on to buyers in the form of increased home prices. This could slow down new construction projects and exacerbate the city’s already tight housing supply. Meanwhile, in Vancouver, developers will have access to a more abundant and affordable supply of materials, suppliers willing to work with local developers to maintain revenue levels may provide incentives with lower pricing to move possible excess supply, allowing developers to keep costs in check. The Canadian side may benefit from having more stock available, as domestic suppliers focus on local markets rather than exporting to the US.


3. Affordability for End Purchasers Post-2025

For homebuyers in Seattle, the tariffs could mean higher prices for both new and existing homes, further straining affordability in an already expensive market. First-time buyers and those with limited budgets may find it increasingly difficult to enter the market. In Vancouver, however, the combination of stable construction costs and a potential increase in housing stock could lead to more affordable options for local purchasers. With more supply available, prices may stabilize or even decrease slightly, making Vancouver a more attractive option for buyers.


4. Long-Term Market Outlook After the Tariffs

The long-term outlook for both markets will depend on how the tariffs impact construction activity and housing supply. In Seattle, the higher costs could lead to a slowdown in new developments, further tightening the housing market and driving up prices. Vancouver, on the other hand, is likely to see a more balanced market, with developers able to meet demand more effectively. The potential for increased stock and lower prices for local purchasers could make Vancouver a more sustainable and appealing market in the long run.  The key for Vancouver would be the resource suppliers willing to work with local developers to continue revenue streams with focus on helping to solve housing supply issues.


5. Canadian Interest Rate Drop

As of February 2025, financial markets expect the Bank of Canada (BoC) to cut interest rates by another 0.50%. This would bring the rate down to 2.50%.  On January 29, 2025, the BoC cut its lending rate by 25 basis points to 3%. This was the first rate cut of 2025.  The BoC's rate cuts are intended to support economic growth, rate drops on both sides of the border would help stimulate development. The BoC's "neutral rate" is between 2.25% and 3.25%. This is the rate at which the economy is neither stimulated nor repressed.  When the BoC cuts rates, it becomes less costly for Canadians and Businesses to borrow money.  Development for housing supply and absorbing the supply that would otherwise be sold to the US should be stimulated helping both suppliers and developers. The next rate decision is expected on March 12, 2025 just around this current 30 day postponement. 


6. Exchange Rate Favors Seattle

Exchange rate as of February 4, 2025 1 USD = 1.43 CDN, that's a lot of buying strength for US developers purchasing CDN supplies. The exchange even with a 25% tariff may still be accounted as a discount for Seattle developers.


7. What This Means for You Moving Forward

As the 2025 tariffs approach, now is the time to start planning. For developers, understanding these potential cost differences will be key to making informed decisions about where to invest. For homebuyers and investors, the tariffs could create opportunities in Vancouver, where affordability and supply may improve. Whether you’re looking to buy, sell, or invest, staying ahead of these trends will be crucial.


"Want to prepare for the 2025 tariff changes and explore how they might impact your real estate goals? Let’s connect and create a strategy tailored to your needs!"

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