Canada’s housing market expected to cool more in 2025, according to CMHC

Fresh statistics indicate that the Canadian housing market may not experience a rapid recovery as initially expected. The Canada Mortgage and Housing Corporation’s (CMHC) recent summer market outlook revealed that the national housing market will continue its cooling trend throughout 2025 due to trade tensions, economic uncertainties, and a decline in population growth.

Home prices are projected to decrease by around 2% this year, with more significant declines expected in Ontario and British Columbia. The average Canadian home price is expected to drop from $689,619 in 2024 to a range between $676,909 and $679,107 in 2025. The report highlighted that many home buyers and developers are adopting a cautious stance due to weakened economic growth and ongoing trade challenges.

Ontario and British Columbia are facing significant price corrections, driven by high costs and reduced investor activities in the condominium market, which are leading to decreased demand. Conversely, Quebec’s housing market slowdown has been less severe compared to other regions, fueled by strong market momentum and stable buyer sentiment.

The updated forecast by CMHC acknowledges growing speculation that trade tariffs between Canada and the United States will persist in the coming years. The agency anticipates a peak in bilateral trade tariffs in the latter half of 2025, gradually declining as trade agreements are forged. Additionally, these trade tensions, coupled with geopolitical uncertainties, are expected to drive inflation above 3% by mid-2026 and potentially bring about a mild recession this year.

Construction activity is also expected to slow down, with housing starts dropping from 245,367 units in 2024 to a range between 224,948 and 237,834 units in 2025. While multi-unit construction will remain relatively high, regional variances will continue to exist. The construction sector is expected to maintain robust activity in Atlantic Canada, the Prairies, and Quebec, while starts will significantly decline in Ontario and British Columbia. Several condominium projects are being postponed, canceled, or converted to rental properties due to developers missing presale targets and escalating unsold inventory.

Regarding rental markets, conditions are showing signs of improvement as new supply levels increase and demand softens. Vacancy rates are slightly rising in major centers, although rent hikes are more moderate compared to previous years.

CMHC predicts a gradual recovery in the housing market from 2026 onward, driven by easing trade tensions, a boost in economic confidence, and predicted moderation in mortgage rates. The agency expects the 5-year fixed mortgage rate to climb gradually to 5.5% over the long term. Despite the expected improvements on the horizon, housing affordability remains a significant hurdle for potential homebuyers, especially in high-cost markets where many households are priced out of purchasing homes.