Canada’s housing market could face considerable headwinds in the months ahead due to uncertainty surrounding U.S. trade tariffs and lower immigration levels.
That is according to the latest housing market outlook released by Canada Mortgage and Housing Corporation (CMHC) on Wednesday.
Officials expect housing starts will slow over the next three years but remain above their 10-year average, mainly due to fewer condominium apartments being built.
“With low investor interest and more young families looking for family-friendly homes, developers will find it harder to sell enough units to fund new projects,” CMHC said in its report.
“The increase in unsold units will likely reduce new project launches, leading to a decline in new condominium apartment construction.”
Housing sales are forecast to rebound as lower mortgage rates and changes to mortgage rules unlock pent-up demand.
But CMHC warned that recovery will be uneven, with slower progress in less affordable regions and in the condominium apartment market.
Officials expect resale homes will attract more renewed demand compared to new homes as they offer more options for homebuyers who are financially constrained.
“In addition, the length of new construction projects may limit developers’ ability to meet demand quickly,” according to the report.
However, some of those homebuyers may face longer loan terms, higher interest costs over the duration of the loan and larger down payments as prices continue to rise.
Home prices are expected to grow faster in 2025, which CMHC said reflects a recovery and renewed demand for ground-oriented homes, before slowing down in 2026 and 2027.
“Although mortgage payments and prices will rise, improved job markets and income growth will make housing more attainable than during the 2022 – 2024 period,” said the report.
Rental markets are also expected to ease with higher vacancy rates slowing rent growth. Renter affordability will improve gradually, said CMHC, with more noticeable changes happening later in the forecast period.
