Recent Canadian home price declines, from historic highs during the pandemic, are expected to cease in mid-2023, but the average annual price will end below the 2022 level. Prices will continue to increase from that point through the forecast period. This is according to the latest Housing Market Outlook (HMO) released by Canada Mortgage and Housing Corporation (CMHC). CMHC’s annual HMO provides overviews and forecasts for Canada overall, and 18 major housing markets, through the end of 2025.
Price increases, combined with higher mortgage rates and a long-term lack of supply of new housing, will continue to make homeownership less affordable for prospective buyers. The affordability challenges in homeownership will keep many households in the rental market, which is already facing severe supply shortages, especially in Toronto, Vancouver, and Montreal. This, in addition to growth in the number of renter households, will drive up demand for rental units, tightening rental market conditions and placing significant upward pressure on rents.
According to the forecast, housing starts will decline and remain well below 2021 and 2022 levels, due to higher construction and borrowing costs for housing developers, before seeing some recovery in 2024 and 2025. These levels of housing supply will be insufficient to meet demand growth and will continue to put affordability pressures on Canadian households.
“Affordability will continue to deteriorate through 2023, in both the ownership and rental markets,” said CMHC Chief Economist, Bob Dugan. “With inflation coming back to the 2% target by the end of the forecast period, mortgage rates will gradually decline, supporting both housing demand and a recovery in the construction of new housing supply. However, with demand for housing still well outpacing new housing supply, affordability challenges will persist for owners and renters.”
CMHC’s annual HMO provides forward-looking analysis into Canada’s national and major housing markets. It helps anticipate emerging trends in Canada’s new home, resale, and rental housing markets at the national and local levels. It includes forecasts for housing market variables such as housing starts, prices and resales. This analysis helps Canadians and the housing industry plan, make decisions, and understand how trends in house sales, prices and starts may have an impact on housing affordability and Canada’s supply challenges.
Download and read the entire Housing Market Outlook (HMO) on the CMHC website.
You can view the podcast breaking down the 2023 CMHC Housing Market Outlook on our YouTube channel.