Canada’s housing market is set to experience changes in 2025 due to economic uncertainty, shifting immigration policies, and evolving real estate trends. In its Housing Market Outlook for 2025, the CMHC has indicated that, while the economy is expected to grow at a modest pace, factors like lower mortgage rates and updated mortgage rules will drive a recovery in housing sales and prices. However, affordability challenges and regional differences will create an uneven recovery across the country.
The CMHC developed a tiered set of forecasts, ranging from a slower recovery due to economic challenges to a stronger rebound driven by lower interest rates and improved market conditions. These projections account for key uncertainties like inflation, employment, and government policies, offering a comprehensive view of potential housing trends.
Source: CMHC 2025 Housing Market Outlook
Economic Challenges and Their Impact on Housing
Several factors will shape Canada’s economy in 2025, including possible changes to U.S. trade policies and lower immigration targets. If the U.S. imposes tariffs of up to 25% on Canadian exports, it could hurt Canada’s economy by increasing inflation, reducing exports, and causing job losses. In response, Canada might impose its own tariffs, leading to further economic strain.
Another key issue is immigration. The government has lowered immigration targets for 2025–2027, which will slow population growth. Since immigration has been a major driver of housing demand, this could limit market growth in some areas. At the same time, slower population growth will ease pressure on rental markets, leading to higher vacancy rates and slower rent increases.
Despite these challenges, Canada’s economy is expected to improve after 2025. As borrowing costs decrease, consumer spending will pick up. However, unemployment will likely rise until mid-2025 before improving in 2026 and 2027. Business investment is also expected to recover as interest rates drop, though high wages and cautious lending may slow this rebound.
To support the economy, the Bank of Canada is expected to cut interest rates further in 2025. Fixed mortgage rates have already started to decline slightly, and variable mortgage rates will likely see larger reductions. This will make homebuying more accessible for some Canadians, helping to boost housing activity.
Housing Market Trends: A Gradual Recovery
Despite economic uncertainty, Canada’s housing market is expected to improve in 2025. Lower mortgage rates and changes to mortgage rules introduced in 2024 will allow more buyers to enter the market. However, affordability challenges will remain, particularly in expensive regions. The CMHC expects that some buyers may have to take on longer loan terms or larger down payments to afford rising home prices. Housing demand will likely shift toward resale homes rather than new builds due to affordability and availability factors.
New Home Construction: Slower Growth, but Continued Activity
Housing starts will decline slightly between 2025 and 2027, mainly due to fewer condominium developments. However, overall construction will remain above the 10-year average. Rental apartment construction will stay strong, though it may slow by 2027 as demand decreases. Meanwhile, ground-oriented homes such as detached houses, semi-detached homes, and row houses may see a slight rebound, especially in more affordable price ranges.
Regional Differences in Market Recovery
The housing market recovery will vary. More affordable regions, like Alberta and Quebec, have already started recovering and are expected to see strong sales and price growth in 2025. These provinces are projected to experience above-average demand as buyers seek more affordable housing options.
In contrast, high-priced markets in Ontario and British Columbia will recover more slowly, below their 10-year averages due to affordability challenges and the effects of lower immigration targets. Prices in these regions will rise more gradually, especially in the first half of the forecast period.
Rental Market Outlook
Canada’s rental market is expected to ease over the next few years. Higher vacancy rates will slow rent increases, gradually improving affordability for renters. However, meaningful improvements will take time, with more noticeable changes happening later in the forecast period.
Overall, Canada’s housing market appears set for a gradual recovery in 2025, with lower mortgage rates helping unlock pent-up demand. However, economic uncertainty, slower immigration, and affordability challenges will affect the pace and distribution of this recovery.