Canada Mortgage and Housing Corporation’s 2025 Housing Market Outlook: Key Trends and Projections

On Wednesday, the Canada Mortgage and Housing Corporation (CMHC) released its much-anticipated 2025 Housing Market Outlook, outlining the critical trends that could shape the Canadian housing landscape over the next few years. The report offers a comprehensive view amid geopolitical uncertainties, trade wars, and immigration shifts, highlighting a generally tame year ahead.

Economic Activity: A Modest Forecast

CMHC predicts a period of "modest" economic activity in 2025, with further improvements expected as we move into 2026 and 2027. This outlook is largely based on potential scenarios involving trade tariffs. Specifically, if the U.S. were to impose 25% tariffs on 10% of Canadian goods, the negative ramifications for Canada’s economy could be somewhat mitigated by increased U.S. government spending and demand for Canadian imports.

The report notes that proposed reductions in immigration targets between 2025 and 2027 may further constrain economic growth. However, consumer spending is projected to rise due to lower borrowing costs. Still, challenges such as diminished purchasing power from prior inflation, escalating unemployment rates, and higher interest rates on mortgage renewals could offset any gains.

The impact on the housing sector remains mixed, as CMHC suggests that lower population growth and broader economic issues will dampen housing activity. Conversely, improved buying power among some households could boost short-term housing demand.

Housing Market Overview

Despite challenges, the report indicates that housing markets are expected to improve in 2025. CMHC indicates that a combination of lower mortgage rates and recent mortgage rule changes in 2024 could unlock pent-up demand among homebuyers who have previously been sidelined.

However, as the market evolves, homebuyers might confront longer loan terms, higher overall interest costs, and larger down payment requirements, even as housing prices rise. The demand landscape is being reshaped significantly by the Millennial generation, who are increasingly looking to purchase homes in urban centers as the trend of remote work diminishes.

Sales will likely be driven by resale homes, which are generally more affordable and readily available. The demand is anticipated to skew toward “ground-oriented homes,” while condo sales—especially in regions reliant on investor activity—may lag.

By 2027, CMHC expects that a considerable amount of the current pent-up demand will be met. Although housing prices and mortgage payments will rise, anticipated growth in job markets and incomes should enhance housing attainability compared to the challenging period between 2022-2024.

Regional Disparities: Affordable Markets Leading Recovery

The report identifies Alberta and Quebec as regions expected to experience historic highs in sales during the forecast period, while markets in British Columbia and Ontario—notorious for their unaffordability—are expected to remain below their 10-year averages. The contrast stems from ongoing affordability challenges in these latter provinces, which are further exacerbated by new immigration targets.

Housing Starts: A Gradual Slowdown

CMHC predicts that housing starts will "slow down," though they will still remain above the 10-year average. The lack of new condominium developments, particularly in investor-driven markets like Ontario and BC, is projected to contribute to this slowdown. Meanwhile, Alberta appears less affected by this trend due to its larger population of resident buyers compared to investors.

In the rental sector, an uptick in construction is anticipated through 2025-2026. However, this trend may decline as the rental market stabilizes, leading to a reduction in rental starts by 2027.

Rental Markets: A Shift Towards Rebalancing

Despite prevailing challenges, the rental market is expected to undergo considerable changes in 2025. As rental supply expands while demand contracts, CMHC forecasts an increase in vacancies and a slowdown in rent hikes. However, a return to meaningful rental affordability remains elusive, with many tenants still at the mercy of previous rent inflations.

The report notes that as financially capable tenants move into higher-priced units, some accommodations will become available for lower-income renters.

Alternative Scenarios: Navigating Uncertainties

CMHC provides insight into potential low- and high-growth scenarios that could affect these predictions. In a low-growth scenario, heightened tariffs lead to a recession, but a subsequent influx of immigrants to Canada boosts population growth, resulting in a delayed recovery in the housing market.

Conversely, a high-growth scenario suggests that fewer and shorter tariffs, coupled with robust U.S. spending and successful Canadian immigration targets, could foster a thriving economy. In this optimistic outlook, more homes would be built, thus enhancing homeownership prospects while also prompting quicker increases in home prices.

Conclusion

The CMHC’s 2025 Housing Market Outlook presents a cautiously optimistic picture of Canada’s housing economy, grappling with both potential pitfalls and avenues for growth. As we near the end of 2025 and head into subsequent years, stakeholders—including homebuyers, investors, and policymakers—will be closely monitoring these trends, equipped with the insights needed to navigate this intricate landscape.