Canada's Housing Market Faces Continued Weakness, CMHC Reports

📅 2 weeks ago

The Canada Mortgage and Housing Corporation's latest update indicates an unexpectedly weak housing market in 2026, with prices and sales declining amidst economic uncertainty and high mortgage rates.

Approximately six months after releasing its 2026 Housing Market Outlook, the Canada Mortgage and Housing Corporation (CMHC) has revealed that the housing market is performing even worse than anticipated. In its Summer Housing Market Update, CMHC reported, "Housing market activity in 2026 has so far been weaker than expected, particularly in sales and prices." The report highlights that housing prices continue to adjust downward in response to weak demand. Despite a slight improvement in affordability, this has not stimulated significant buyer activity, as potential purchasers remain cautious. Economic uncertainties, elevated mortgage rates, and slow income growth are also contributing to the market's struggles.
Regional variations in market conditions have been noted, with the Prairies and Quebec showing some positive momentum. In contrast, British Columbia and Ontario, the two largest real estate markets in Canada, are experiencing historically low sales levels. CMHC stated, "Housing starts are expected to decline further as builders continue to respond to unsold inventories and high construction costs." The report anticipates that construction levels will remain at historically low rates, particularly in Ontario and British Columbia, especially in the condominium sector. Although housing starts in the Prairies and Quebec are also expected to decline, this follows recent peaks.
The rental market is also feeling the impact of these conditions, with new construction easing from last year's record highs. However, the shift in focus from condominiums to rental units is notable as developers adapt to changing market demands. CMHC forecasts that national rental markets will continue to ease in 2026, with an increase in new supply, particularly from purpose-built rental projects. This influx is expected to enhance vacancy rates and temper average rent growth, especially in larger urban centers such as Toronto and Vancouver, which are currently impacted by slower population growth and an oversupply of condominiums in secondary rental markets.
In its updated forecasts, CMHC detailed significant differences between the housing markets of Greater Vancouver and Greater Toronto. Vancouver had 28,112 housing starts in 2024 and 27,185 in 2025, with projections for 2026 ranging between 26,000 and 27,000 starts. This represents a decline from previous years, with expectations for further reductions in subsequent years, estimating between 21,900 and 25,100 starts in 2027 and between 20,500 and 22,000 in 2028. Conversely, Toronto's projections suggest a contrasting upward trend, with expectations for a similar number of starts in 2026 as Vancouver, but a growth trajectory thereafter.
Sales figures also reflect this divergence. Vancouver recorded 35,671 home sales in 2024, dropping to 30,780 in 2025, with projections for 2026 estimating between 28,000 and 28,800 sales. Forecasts for 2027 and 2028 indicate potential improvements, with sales expected to range from 29,800 to 32,200 in 2027 and between 28,800 and 32,800 in 2028. In contrast, Toronto's market is anticipated to see a substantial increase in sales, rising from an estimated 63,000 to between 69,500 and 71,500 in 2027, and further to between 75,200 and 77,000 in 2028.
The rental market in Vancouver is projected to see a slight decline in vacancy rates, from 3.7% in 2025 to an estimated 3.6% this year, further decreasing to 3.5% in 2027, and then 3.4% in 2028, with rents expected to grow by approximately $50 annually. Toronto's vacancy rate is expected to rise from 3.0% last year to 3.8% this year, remaining stable next year before decreasing to 2.9% in 2028, indicating a healthy balance in the rental market.
The economic backdrop remains a significant factor in these housing market projections. CMHC notes that uncertainty is likely to persist throughout the forecast period, attributing potential inflationary pressures in 2026 to global tensions, particularly the ongoing US-Iran conflict. Trade uncertainties between the US and Canada are anticipated to negatively affect business investments and hiring. Despite these challenges, CMHC forecasts a modest growth of 0.7% in 2026, with Western Canada expected to lead this growth due to favorable commodity prices influenced by global events. Meanwhile, Central Canada is likely to lag due to trade risks, with Atlantic Canada projected to experience the weakest conditions. Economic growth is not expected to accelerate until after 2027, and even then, it will likely remain moderate, although regional disparities may decrease due to diversified trade and increased business investments. "These economic conditions set the backdrop for the housing market outlook in Canada," CMHC concluded.

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