Canada’s Housing Market Outlook: Challenges Ahead for Homebuilders

As Canada navigates a complex landscape of economic uncertainty, homebuilders across the nation are bracing for a tumultuous journey ahead. With rising construction costs, waning demand, and increasing inventories, the housing market is expected to face persistent challenges—especially in the condominium sector—through 2028. The latest Housing Market Outlook (HMO) report from the Canada Mortgage and Housing Corporation (CMHC) underscores these pressures, illuminating the impact of geopolitical strife, trade hesitancy, and subdued population growth on housing demand.

Growing Construction Costs and Softening Demand

The CMHC’s report cites higher construction expenses and softer consumer interest as primary factors contributing to the expected slowdown in housing activity. As Kevin Hughes, CMHC’s Deputy Chief Economist, notes, "Many households and businesses remain cautious due to geopolitical and trade uncertainty." This environment is prompting potential buyers to postpone home purchases and builders to hesitate in initiating new projects. The result is a challenging market for both new developments and existing inventory.

Regional Disparities in Housing Activity

While it’s clear that pressures will vary by region, stark contrasts emerge in the projected performance of housing markets. For instance, Ontario and British Columbia are expected to see new construction and home sales fall below their 10-year averages. In sharp contrast, the Prairies and Quebec are likely to outperform long-term expectations.

• Ontario and British Columbia: These provinces are grappling with the highest pressures. Toronto, in particular, is projected to experience low new housing starts, especially in the condominium segment. Although strong rental starts are on the horizon, rising vacancy rates and slow rent growth pose challenges for the rental market.

• Prairies and Quebec: Conversely, markets in the Prairies, as well as Quebec, are expected to show signs of resilience. Calgary, after several years of rapid growth, will see a moderation in new home construction, guided by a burgeoning rental sector that could temporarily push vacancy rates higher, impacting rent growth.

Housing Market Highlights: City by City

Toronto

The Toronto housing market appears to be in a precarious position as new housing starts remain low throughout 2026. The slowdown in condominium construction will be somewhat alleviated by strong rental starts; however, the community might face rising vacancy rates which could hamper future rental development.

Vancouver

In Vancouver, the forecast is equally concerning. High construction costs coupled with declining demand—particularly for condominiums—are expected to stymie new projects. A surge of rental units coming onto the market may lead to elevated vacancy rates, further exerting downward pressure on rent growth and rental construction.

Montreal

Colliding with the downward trends in other metropolitan areas is Montreal, where housing starts are projected to stay high following record growth in 2025. The continuation of rental construction within the city is expected to drive vacancy rates higher as a robust influx of new units comes online.

Calgary

After experiencing a housing boom, Calgary is expected to moderate its pace into 2026. More rental units entering the market may increase vacancy rates, leading to a gradual slowdown in rent growth. Although this could deter some investors, local economic conditions remain stronger than many other regions.

Edmonton and Ottawa

In Edmonton, housing starts are forecasted to decline moderately due to high inventories and slower population growth, approaching a more balanced market. Similarly, in Ottawa, after reaching a historic peak in 2025, housing starts are expected to slow as fewer international students and workers move to the region, softening the rental market.

Halifax

Halifax will see housing starts trend down from recent highs, transitioning from rapid, migration-driven growth to more sustainable conditions. Even with this slowdown, a strong local labor market should offer some stability, supporting modest home sales and pricing.

Conclusion

The CMHC’s 2026 Housing Market Outlook paints a nuanced picture of Canada’s housing landscape, influenced by various factors across the provinces. As homebuilders grapple with rising costs and changing consumer sentiments, the emphasis on regional performance becomes critical.

While markets like Montreal and Calgary display resilience, areas like Toronto and Vancouver prepare for challenges that could significantly alter their housing dynamics. For homeowners, potential buyers, and investors alike, staying informed about these regional differences and broader economic trends will be essential as the market evolves. For more detailed insights, the full report can be accessed through the CMHC website.