The Canada Mortgage and Housing Corporation (CMHC) has released its latest housing market outlook, predicting that home prices in Canada could reach peak levels seen in early 2022 by next year and continue to climb to new highs by 2026.
Despite an increase in rental housing supply expected in 2023, the CMHC forecasts that demand will outpace supply, leading to higher rents and lower vacancy rates in the coming years. The agency cites “unfavourable financing conditions” as a factor that will make it more difficult for homebuilders to start new rental projects in 2024.
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However, the CMHC anticipates that by 2025-2026, lower interest rates, continued government support, and policies encouraging greater density in urban centers will make more rental projects viable.
The report also suggests that affordability in the homeownership market will be a concern for the next 3 years. Declining mortgage rates and the country’s strongest population growth since the 1950s are expected to spur a rebound in home sales and prices, even as home sales have dropped by around 33% from their peak in early 2021 and prices have fallen by nearly 15% over that time.
The CMHC predicts that the resurgence in home sales will be driven by a shift in demand toward lower-priced homes and markets across Canada. However, the agency warns that sales activity from 2025 to 2026 will likely slightly surpass the past 10-year average but remain below the record levels recorded from 2020 to 2021, due to the continued high cost of housing.
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The report also forecasts that housing starts in Canada will decline this year before recovering in 2025 and 2026, reflecting the lagged effect of higher interest rates on new construction. The CMHC expects the Prairie provinces to perform well, citing affordable home prices and a stronger economic outlook. At the same time, Ontario and British Columbia may struggle with the decline in national housing starts.
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