Canada's housing market is expected to remain subdued through 2026 as economic uncertainty, slower population growth, high borrowing costs and modest income growth continue to weigh on demand, according to a mid-year housing market outlook released by the Canada Mortgage and Housing Corporation.
The federal Crown corporation said housing demand is expected to remain constrained across the country this year, with home prices projected to decline before returning to modest growth in 2027 and 2028. The report also includes updated forecasts for 18 housing markets across Canada.
The outlook points to a slow-growing Canadian economy in 2026, supported by consumer spending, government investment and exports. However, CMHC said geopolitical tensions, particularly the conflict between the United States and Iran, are expected to temporarily increase inflation, while ongoing Canada-U.S. trade uncertainty continues to affect business investment and hiring decisions.
Those economic conditions are expected to continue limiting activity in the housing market, even as prices soften.
Home sales are forecast to recover gradually through 2028 but remain below levels recorded over the past decade. CMHC said market conditions are expected to vary across the country, with Prairie markets maintaining relatively strong sales activity and leading price growth, while Quebec is expected to post modest gains under more balanced market conditions.
In contrast, Ontario and British Columbia are expected to continue facing affordability pressures and weaker housing market activity.
Housing starts expected to decline
The report also projects a continued decline in housing starts over the forecast period as builders respond to weaker demand, elevated inventories and high construction costs.
Construction activity is expected to remain below historical averages in Ontario and British Columbia, particularly in condominium markets. In the Prairies and Quebec, housing starts are projected to moderate after recent periods of stronger activity.
Rental construction is also expected to ease gradually from peak levels reached in 2025.
CMHC said maintaining a sustainable pace of new rental supply will remain important to meeting future housing needs as economic conditions improve later in the forecast period and more renter households enter the market.
Further easing in rental market
The report also forecasts further easing in rental market conditions as additional supply becomes available, particularly in larger urban centres.
Rising vacancy rates in markets including Toronto, Vancouver and Montréal are expected to slow average rent growth, especially for asking rents. Prairie markets are expected to see more modest rent increases, supported by relatively stronger demand.
Despite those trends, CMHC said affordability challenges are expected to persist nationally because rents remain high relative to incomes.
Kevin Hughes, Deputy Chief Economist at CMHC, said lower home prices alone have not been sufficient to revive housing demand.
"Price reductions have not yet been enough to bring demand back into the market as economic uncertainty, income growth and borrowing conditions all have played a role in sidelining buyers. We expect conditions to improve over the medium-term, however, housing construction should remain suppressed as the industry factors in today's elevated inventories and weaker demand."
The report is contained in CMHC's 2026 Housing Market Outlook Mid-Year Update, which also provides forecast data for 18 housing markets across Canada.