CMHC sees short-term decline in construction, but long-term optimism remains
Canada's housing starts are expected to slow in 2024 before recovering by 2025 after hitting record highs in recent years, according to the latest forecast from the Canada Mortgage and Housing Corporation (CMHC).
“Purpose-built rental starts, fueled by unprecedented demand and government support, hit record levels in 2023, sustaining overall housing starts in Canada near historically high levels,” said CMHC chief economist Bob Dugan (pictured). “However, unfavorable financing conditions are expected to make it more difficult for home builders to start new rental projects in 2024.”
In its Housing Market Outlook, CMHC projected housing starts will decrease this year but then increase in 2025 and 2026 as lower interest rates and continued government support make more projects viable.
“Lower interest rates will also benefit homebuyers as real income and confidence levels improve. Consequently, more homes are expected to be built in 2025-2026,” Dugan said.
The forecast also indicates that despite rising rental housing completions in 2023, supply will not keep up with demand, leading to higher rents and lower vacancy rates.
CMHC cited strong population growth and renter households staying put due to high homeownership costs as key drivers of the tight rental market.
In the homeownership market, the outlook calls for both home prices and sales to rise in 2024. Prices could reach and exceed the previous peak seen in early 2022 by 2026, fueled by persistent high demand.
However, sales will remain below record 2020-2021 levels due to ongoing affordability challenges for prospective buyers.
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The report also provides city-specific outlooks. Housing starts in Vancouver will slow from record 2023 levels due to higher rates, even as sales, prices, and rents continue rising. Meanwhile, Edmonton and Calgary are expected to see strong housing supply growth in response to high demand and population expansion.
Toronto is projected to see declines in housing starts in 2024 and 2025 due to high construction and financing costs. Home prices are still expected to resume growth, further straining affordability.
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