The Canada Mortgage and Housing Corporation (CMHC) is predicting that home prices could return to the peak levels seen in early 2022 by next year, with the potential to reach new highs by 2026. This projection comes amidst concerns about home affordability, which are expected to persist over the next three years.
According to CMHC's latest housing market forecast, the combination of falling mortgage rates and Canada's highest population growth since the 1950s is likely to stimulate a recovery in both home sales and prices. Over the past two years, home sales dropped by approximately one-third from their peak in early 2021, and prices fell by nearly 15%. However, the outlook suggests that as mortgage rates decrease and economic uncertainties ease in late 2024, buyer activity will increase.
The report indicates that the rebound in the housing market will be fueled by a shift in demand towards more affordable homes and various regional markets across Canada. Although sales activity is expected to surpass the average of the past decade from 2025 to 2026, it will remain below the record levels seen between 2020 and 2021 due to the high cost of housing.
Last year's data revealed that construction commenced on 137,915 new units across Canada’s six largest cities, aligning with the levels observed in recent years due to a surge in new apartment developments. Despite this increase, CMHC projects that rental housing supply will not keep pace with demand, leading to higher rents and lower vacancy rates in the coming years.
Bob Dugan, CMHC’s chief economist, noted that unfavorable financing conditions could hinder new rental projects in 2024. Michael Mak, another CMHC economist, highlighted that while many rental projects are approved, construction delays due to labor shortages are affecting the timeline. Nonetheless, a significant number of rental units currently under construction are expected to be completed within the next one to three years, providing a much-needed boost to the rental market.
Regionally, CMHC anticipates that Ontario and British Columbia will see a decrease in housing starts this year, with developers facing challenges such as high financing costs. Conversely, the Prairie provinces are expected to perform well, driven by affordable home prices and a strong economic outlook that should attract both homebuyers and job seekers.
In Quebec, housing starts are predicted to grow but will remain below post-pandemic levels following a decline last year. The Atlantic region is expected to experience less pressure on new home construction due to a slowdown in migration, with new starts aligning more closely with the slower population growth.
B.C. Housing Minister Ravi Kahlon expressed confidence that the province will exceed CMHC’s housing start projections and continue to lead the country in per capita housing starts. He emphasized that the projections are based on current conditions and do not account for ongoing government actions that may impact the market.
Overall, the real estate landscape in Canada is poised for significant changes, with varying impacts across regions and market segments. Stay informed and prepared to navigate these evolving trends in the coming years.
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