The Canada Mortgage and Housing Corp. (CMHC) predicts that by next year, home prices could equal the peak levels observed in early 2022, and by 2026, they could set new records. The latest housing market forecast from the agency, published on Thursday, indicates that despite an expected increase in rental housing availability in 2023, the supply is unlikely to meet the demand. This could result in higher rents and lower vacancy rates in the future.
“Unfavourable financing conditions are expected to make it more difficult for home builders to start new rental projects in 2024,” stated CMHC’s chief economist, Bob Dugan.
“We anticipate by 2025-2026 lower interest rates, continued government support, and policies encouraging greater density in urban centres should make more projects viable.”
According to CMHC, affordability in the homeownership market will be a concern over the next three years. Factors such as declining mortgage rates and the country’s most robust population growth since the 1950s are likely to trigger a resurgence in home sales and prices.
From their peak in early 2021 to the end of 2023, home sales fell by approximately one-third, while prices declined by nearly 15 percent, as reported by CMHC.
“During this time, the pool of potential homebuyers grew through robust population growth, increased savings and higher incomes,” the report noted.
“As mortgage rates and economic uncertainty decrease in the second half of 2024, we expect buyers to start returning to the market.”
The report also suggests that the revival will be fuelled by a shift in demand towards more affordable homes and markets throughout Canada.
The agency anticipates that sales activity from 2025 to 2026 will slightly exceed the average of the past decade but will remain below the record levels seen from 2020 to 2021 due to the high cost of housing.
CMHC also predicts a decline in housing starts in Canada this year, followed by a recovery in 2025 and 2026. This reflects the delayed impact of higher interest rates on new construction.
A recent report from the agency revealed that construction began on 137,915 new units last year in Canada’s six largest cities, a figure roughly equivalent to those of the previous three years, thanks to a surge in new apartments. Regionally, CMHC predicts that Ontario and B.C. will lead the decline in national housing starts this year, cautioning that developers may find it challenging to even increase apartment construction due to factors such as financing costs.
Housing starts in certain eastern provinces “will remain historically robust but will realign more closely with weaker population growth.”
