Canada’s Housing Market Outlook: Navigating Economic Uncertainty
Predicting Canada’s economic and housing market future has become increasingly complex. Factors such as ongoing tariff disputes, reduced immigration targets, and shifts in federal leadership contribute to this uncertainty. With these dynamics at play, the Canada Mortgage and Housing Corporation (CMHC) provides valuable insights into the evolving landscape of rental housing in its latest report.
Rental Demand Forecast
According to the CMHC’s latest Housing Market Outlook, the interplay of reduced immigration and a rise in first-time homebuyers is expected to result in a decline in rental demand throughout the period from 2025 to 2027. Although these changes may pose challenges, the CMHC anticipates a gradual improvement in rental affordability as vacancy rates are projected to rise. The outlook suggests that, by 2025, rent growth in many Canadian markets will slow considerably as more rental units become available.
CMHC analysts note that “supply will continue to expand as new rental units are completed, leading to higher vacancies and slower rent increases.” This trend is further exacerbated by changing demographics and economic conditions, making the rental market landscape particularly dynamic.
Apartment Construction Boom
Since 2024, Canada has witnessed a surge in apartment starts, attributed to government initiatives and a growing renter demographic. CMHC forecasts that this trend will continue into 2025 and 2026, fueled by numerous multi-residential projects coming online. However, industry experts express caution, indicating that construction activity may begin to slow by 2027 as the pipeline for purpose-built rental units diminishes.
Regional Highlights
British Columbia
In British Columbia’s major centers, vacancy rates have increased sharply in 2024 and are expected to remain elevated in the near-term. A considerable volume of rental units is set to hit the market soon; however, many of these units may be priced beyond the reach of the average tenant. With a slowdown in the growth of the renter population due to fewer international migrants, rental demand is anticipated to taper off. Nonetheless, the preference of new immigrants for rental over homeownership could provide some stabilizing effects on rental pricing.
In Metro Vancouver, housing starts are anticipated to recover in 2025 following a downturn in 2024. Yet, challenges such as limited land availability and rising costs may hamper future growth. The focus on rental construction is expected to persist, but leasing higher-priced units may pose challenges, particularly in the competitive market of Vancouver.
Alberta
In Alberta, CMHC predicts that rent growth will see support from new policies and programs, making it an attractive market for new construction. Edmonton stands out as one of the more affordable major urban centers, likely drawing a modest influx of migrants. Meanwhile, Calgary may experience an increase in vacancy rates as new housing comes to market, outpacing demand. This shift may relieve rent pressures, compelling landlords to become more competitive in leasing their properties.
Ontario
In Ontario, primary market rent growth has decelerated, driven by higher vacancy rates and increased multi-unit housing starts. CMHC foresees a continuation of this trend in 2025, fueled by a decrease in the non-permanent resident population and fewer international students. Toronto, the largest city in Canada, is projected to face an uptick in vacancy rates as the market adjusts to heightened construction of both condominiums and purpose-built rentals.
The Condominium Market
Looking forward, CMHC expects a notable slowdown in housing starts across Canada, particularly concerning the construction of condominium apartments. As investor interest wanes and families increasingly seek more spacious living arrangements, developers may face hurdles in selling sufficient units to finance new projects. This situation is anticipated to lead to a decline in new condominium construction.
Regional variations will be evident; for instance, Ontario’s pre-construction condominium market—often driven by investors—is predicted to see diminished demand. In contrast, British Columbia and Alberta may experience less impact, as homebuyers are more often residents rather than investors.
Conclusion
Canada’s housing market is on the precipice of significant change, marked by rising vacancy rates and the potential for slower rent growth. Factors such as reduced immigration, economic uncertainty, and evolving demographics will continue to shape the landscape. While the CMHC outlines a cautious but optimistic outlook for rental affordability, it is essential for potential investors and renters alike to remain astute to these evolving market conditions.
For further insights and detailed reports on Canada’s housing market, visit the CMHC website.
