Understanding Canada’s Housing Market: Reflections on 2025 and Predictions for 2026
As we delve into the current state of Canada’s housing market, recent discussions from the podcast In-House offer valuable insights into the trends, challenges, and critical shifts that shaped the housing landscape in 2025. Hosted by Joëlle Hamilton and featuring Mathieu Laberge, Chief Economist at CMHC, this conversation highlights key issues ranging from supply challenges to rental market dynamics.
The Challenge of Supply Creation
One of the primary concerns facing Canada’s housing market is the difficulty in creating new supply. Mathieu Laberge identifies two broad reasons for this: contextual and structural. Contextually, 2025 was marked by economic uncertainty driven by external factors, including political changes in the U.S. and trade tariffs that challenged supply chains.
On the structural side, Laberge emphasizes that low productivity and excessive regulation within the housing industry slow the pace of new construction. To meet the growing demand, he suggests that regulatory burdens need to be lowered, allowing for a quicker housing start rate.
Shifts in Housing Starts
Reflecting on the previous year, Hamilton questions where the most significant changes in housing starts occurred. Laberge recalls an early year filled with momentum, which gradually diminished as uncertainty took hold. Interestingly, this shift in housing starts marked a transition towards smaller, quicker-to-build units such as semi-detached houses and row houses, especially in regions like Alberta and Quebec, moving away from larger condo developments.
A Dynamic Rental Market
The rental market is another critical component of Canada’s housing landscape. Laberge notes that 2025 saw an influx of new rental units and a rise in vacancy rates, signaling a shift from a once extremely tight rental market to a healthier balance. However, this balancing act is uneven; higher-end rentals in markets like Toronto faced increased competition and slower rent growth, whereas affordable rentals remained exceptionally tight.
For lower-income households, the search for affordable housing is still fraught with challenges. The disparity in the rental market reflects broader issues of affordability that need continued attention.
Impact of Interest Rates on Borrowers
The Bank of Canada’s policy changes also played a crucial role in shaping the housing market in 2025. With a steady and then decreasing interest rate environment, borrowers had the opportunity to reassess their mortgage choices. Laberge observes a shift back towards fixed-rate mortgages, particularly for shorter terms, indicating that households remain cautious and prefer flexibility as they await clearer economic signals.
What Lies Ahead: 2026 and Beyond
Looking forward to 2026, Laberge warns that the macroeconomic environment remains unpredictable. Key events, such as CUSMA reviews and U.S. midterms, could impact Canada’s housing market. With momentum starting off low but conditions still requiring diligent monitoring, the biggest question is what will sustain markets in the years to come.
Laberge emphasizes the importance of increasing supply to meet the eventual surge in demand from younger generations and newcomers to Canada. Without significant improvements in housing starts, the potential for a crisis looms on the horizon.
Conclusion
In summary, the insights shared in the In-House podcast highlight the complex dynamics at play within Canada’s housing market. With supply challenges, the evolving landscape of rental properties, and the implications of interest rate adjustments, stakeholders must navigate a multifaceted environment. As we embark on 2026, staying informed and proactive in addressing these critical issues will be essential to ensuring a balanced and sustainable housing market for all Canadians.
For ongoing updates and deeper discussions on Canada’s housing landscape, tune in to In-House on various platforms including Spotify, Apple Podcasts, and Amazon Music. Don’t forget to subscribe and stay engaged with future insights!
