U.S. tariff threat creates cautious mood again for London home buyers

After a strong year for housing starts in 2024, London home builders are bracing for what could be a bumpy year, amid concerns a trade war with the United States will become a new factor pushing up housing costs.

Confidence among home buyers grew last year as interest rates began to come down, said Jared Zaifman, CEO of the London Home Builders' Association.

Now, however, there are worries the price of building materials — everything from windows to steel to wallboard panels — could increase if U.S. President Donald Trump follows through with his threat to slap 25 per cent tariffs on Canadian goods.

The tariff threat on Canadian imports was paused until March 4. Canada's federal government has vowed to impose counter-tariffs if Trump follows through on his threats.

It all stands to push up the cost to build and buy homes, though Zaifman also said builders are watching to see how much of what Trump has said becomes actual policy. 

"With this uncertainty, it's creating a lot more trepidation," said Zaifman.  

This week, federal housing minister Nathaniel Erskine-Smith said the cost of home building will go up at a time when there's a desperate need across the country for more housing.

Zaifman said the potential for tariffs could undo what had been a positive outlook heading into to 2025. There was optimism that with interest rates back down, buyers could feel confident to get back into the market. 

A city report released last week said the number of approved permits for new housing units increased by 114 per cent in 2024 after a slow year in 2023.

What builders are watching for now, Zaifman said, is if Canada will hit the United States with counter-tariffs that could raise the price of everything that originates south of the border. 

"It's every aspect of the building products and the supply chain," said Zaifman. "It's lumber, it's drywall, it's steel, even hand tools." 

Cost escalation clauses in purchase deals

In a bid to be upfront with their customers in a fast-changing environment, some builders are adding cost-escalation clauses to customer purchase agreements, Zaifman said.

Essentially, the agreements let buyers know the price they pay may rise if the builder faces increased material costs between the time a home is bought and is ready for move-in.

"Part of the challenge is that we don't know what those costs will look like in six months or in a year, so they're trying to work with potential purchasers so they're on the same page throughout the process," he said. 

And while customers are keeping a close eye on the price of new homes, Zaifman said a potential trade war with the United States hasn't diminished the underlying reasons London is popular with buyers.  

"People are still calling our builders constantly," he said. "[The tariff threat] is just a frustrating factor that is out of our hands."