Prices set to break record by 2026: CMHC

Canadian housing prices could reach a new record by 2026, driven by unrelenting demand from a growing population, according to an outlook published by the national housing agency on Thursday.

Canada Mortgage and Housing Corporation’s 2024 Housing Market Outlook predicts that while sales fell by a third and prices dropped 15 per cent during the slowdown of the past few years, the period has set the stage for a resurgence.

“During this time, the pool of potential homebuyers grew through robust population growth, increased savings and higher incomes. As mortgage rates and economic uncertainty decrease in the second half of 2024, we expect buyers to start returning to the market,” CMHC said in the report.

Lower interest rates and a stronger economy combined with the strong population growth recorded in 2023 — the highest since the 1950s — are expected to contribute to a recovery in sales, which will include a shift in toward lower-priced homes and markets across Canada.

The report projects that sales levels in 2025 and 2026 will slightly surpass the 10-year average but remain below the record levels seen in 2020 to 2021, as housing continues to be expensive for the average household.

Regional variations in home prices and construction starts are also expected, with the Prairie provinces projected to perform well due to their affordable home prices and stronger economic outlook. That economic strength is expected to attract homebuyers and job seekers, leading to increased home construction with fewer constraints on skilled workers.

The outlook for housing starts is more bleak in Ontario and British Columbia.

High home prices in these provinces are expected to make certain home types unaffordable, while developers may struggle with apartment construction due to supply-side challenges, particularly financing costs.

In Quebec, housing starts are expected to grow more robustly as they return to normal levels after experiencing a sharp decline in 2023, preceding similar trends in other provinces.

In the Atlantic region, the pressure on new home construction due to unusually strong migration in 2022 and 2023 is expected to ease.

Overall, new apartment starts have begun to slow down in 2024, especially when compared to the record-high levels seen in 2023. The increase in 2023 was mainly due to a high demand for purpose-built rental units, supported by government policies. However, CMHC anticipates that in 2024, less favourable financing conditions will make it difficult for new rental projects to move forward.