According to a recent report from the Canada Mortgage and Housing Corp. (CMHC), the Canadian housing market is on a trajectory towards matching its early 2022 peak levels by next year and setting new records by 2026. Despite an uptick in the supply of rental housing in 2023, demand continues to outpace supply, leading to an increase in rental prices and lower vacancy rates. CMHC’s Chief Economist, Bob Dugan, highlighted that unfavorable financing conditions in 2024 could hamper the initiation of new rental projects.
The report suggests that by 2025-2026, lower interest rates, continued government support, and policies promoting urban density might boost the feasibility of more housing projects. However, affordability in the homeownership sector remains a concern over the next three years. The report attributes this to declining mortgage rates and significant population growth, which are expected to rejuvenate home sales and prices.
After a slump in home sales and a 15% decrease in prices from early 2021 to the end of 2023, a rebound is anticipated. This resurgence is credited to an expanding pool of potential homebuyers, driven by population growth, increased savings, and higher incomes. The CMHC foresees a return of buyers to the market in the latter half of 2024, spurred by diminishing mortgage rates and economic uncertainty, coupled with a shift towards more affordably priced homes across the country.
While sales activity between 2025 to 2026 is predicted to exceed the ten-year average, it is not expected to reach the record highs of 2020-2021 due to the prevailing high cost of housing. The report also projects a decline in housing starts this year, with a recovery anticipated in 2025 and 2026, reflecting the delayed impact of higher interest rates on new constructions. Regional forecasts indicate a downturn in housing starts in Ontario and B.C. for this year, while the Prairie provinces are expected to witness growth due to affordable housing prices and a positive economic outlook. In Quebec, housing starts are projected to increase but not surpass post-pandemic levels, and the Atlantic region is expected to see a realignment of new home construction with slower population growth.