(Ottawa) The Canada Mortgage and Housing Corporation (CMHC) predicts that house prices could return to the peaks reached in early 2022 by next year and reach new highs by 2026.
In its latest Housing Market Outlook report, released Thursday, the company says that despite an increase in the number of rental homes coming to market in 2023, supply is not expected to keep up with demand, resulting in an increase in rents and a decline in vacancy rates over the coming years.
“Adverse financing conditions are expected to make rental construction difficult in 2024,” Bob Dugan, CMHC’s chief economist, said in a statement.
We forecast that by 2025 -2026, lower interest rates, continued government support and policies favoring density in urban centers should support the viability of an increased number of residential development projects .
Extract from the CMHC report
CMHC said affordability in the homeownership market will also be a concern over the next three years, as falling mortgage rates and the country’s strongest population growth since the 1950s will likely boost a rebound in housing sales and prices.
Home sales fell by about a third between their peak in early 2021 and the end of 2023, while prices fell almost 15% during that period, CMHC said.
“During this period, the pool of potential buyers has expanded thanks to strong population growth, increased savings and rising incomes,” the report said.
“As mortgage rates and economic uncertainty decrease during the second half of 2024, we expect buyers to begin returning to the market. »
The report says this recovery will also be fueled by a shift in demand toward cheaper housing and markets across Canada.
The agency forecasts that sales between 2025 and 2026 will slightly exceed the average of the last ten years, but that they will remain below the record levels recorded between 2020 and 2021, due to the persistent cost of housing.
CMHC also says that housing starts in Canada are expected to decline this year before recovering in 2025 and 2026, due to the lagged effect of rising interest rates on new construction.
According to a report released last week by the organization, 137,915 new housing units were started last year in Canada’s six largest cities, a level that roughly corresponds to those of the last three years, due to a sharp increase in the number of new apartments.
Regionally, CMHC predicts Ontario and British Columbia will lead the decline in national housing starts this year, warning that developers may struggle to boost apartment construction due to difficulties such as financing costs.
CMHC expects the Prairie provinces to perform well, due to affordable housing prices and a more favorable economic outlook that will likely attract home buyers and job seekers, leading to an increase in construction.
In Quebec, housing starts are expected to increase, but remain below post-pandemic levels after a sharp decline in new housing construction last year.
The Atlantic region is expected to see less pressure on new housing construction than it has since 2022 due to exceptionally strong migration, as housing starts in some eastern provinces “will remain historically robust, but will align more closely with lower population growth.”