After reaching historically high levels in recent years, housing starts in Canada are expected to decline in 2024, before recovering in 2025 and 2026, reflecting the lagged effect of higher interest rates on new construction, according to the latest Housing Market Outlook (HMO) released by Canada Mortgage and Housing Corporation (CMHC).
The HMO provides overviews and forecasts for new home construction, rental markets, home sales and home prices. Along with a national overview, this version of the HMO also provides data and forecasts for Vancouver, Calgary, Edmonton, Toronto, Ottawa, and Montréal. A second version of the HMO, covering 12 more CMAs in Canada, will be released on May 1st.
Bob Dugan
In the homeownership market, both home prices and sales are forecast to rise in 2024. By 2025, prices could reach the peak levels recorded in early 2022 and surpass them in 2026, driven by high demand. Home sales will rebound in 2024, but will remain below the record 2020-21 levels, restricted by affordability challenges among prospective buyers, said the CMHC.
“Purpose-built rental starts, fueled by unprecedented demand and government support, hit record levels in 2023, sustaining overall housing starts in Canada near historically high levels. However, unfavorable financing conditions are expected to make it more difficult for homebuilders to start new rental projects in 2024. We anticipate by 2025-2026 lower interest rates, continued government support, and policies encouraging greater density in urban centers should make more projects viable. Lower interest rates will also benefit homebuyers, as real income and confidence levels improve. Consequently, more homes are expected to be built in 2025-2026, said Bob Dugan, Chief Economist for CMHC.
Report Findings CMAs:
- New home construction in Vancouver will slow from record levels in 2023 due to higher interest rates catching up with construction timelines. Meanwhile, demand pressures will push sales, prices, and rents higher throughout the forecast period.
- Housing starts activity will remain strong in Edmonton, driven by strong economic conditions, while sales and home prices are expected to see modest growth. The rental market will remain tight as demand continues to outpace supply.
- Similarly, Calgary is expected to see strong supply growth as home construction responds to high demand and population growth. This demand pressure will also continue to tighten the rental market and increase resale market activity.
- In Toronto, total starts are expected to decline in 2024 and 2025 due to high construction and financing costs. Home prices are expected to resume growth in 2024 making homeownership affordability a persistent challenge, while the rental vacancy rate will increase slightly but overall rental market conditions will remain tight.
- Ottawa will see an increase in housing starts, driven by multi-unit construction. Both home prices and the rental vacancy rate should see modest growth, driven by a gradual decrease in mortgage rates and high rates of rental supply growth, respectively.
- New home construction in Montréal will see a slight upturn through 2025 due to lower interest rates but will not keep pace with demand. Property prices will see a moderate recovery in 2024, while the rental market will continue to tighten due to supply and demand pressures.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
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