Canada’s housing market to cool further in 2025, CMHC reports

Canada’s housing market will continue its cooling trend through 2025, driven by trade tensions, economic uncertainty and slower population growth, according to Canada Mortgage and Housing Corporation’s (CMHC’s) summer market outlook released Thursday.

Home prices expected to fall 2%

The national housing agency forecasts home prices will decline approximately 2% this year, with steeper drops anticipated in Ontario and British Columbia. The Canadian average home price is projected to fall from $689,619 in 2024 to between $676,909 and $679,107 in 2025.

“Many home buyers and developers are taking a ‘wait-and-see’ approach amid weaker economic growth and lingering trade tensions,” the report said.

Ontario and British Columbia face the largest price corrections, where high costs and reduced investor activity in the condominium market continue to dampen demand. Quebec’s housing activity has slowed less than other regions, supported by stronger market momentum and more stable buyer sentiment.

Trade tensions drive economic headwinds

CMHC’s updated forecast reflects growing confidence that some level of tariffs between Canada and the United States will persist in coming years. The agency expects bilateral trade tariffs to peak in the second half of 2025 before gradually declining by late 2026 as trade agreements are reached.

These trade pressures, combined with geopolitical uncertainties, are pushing inflation back above 3% by mid-2026 and contributing to a likely modest recession this year.

Construction activity slowing

Housing starts are projected to decline from 245,367 units in 2024 to between 224,948 and 237,834 units in 2025. Multi-unit construction will remain elevated by historical standards, but regional variations persist.

Construction will stay strong in Atlantic Canada, the Prairies and Quebec, while starts will decline sharply in Ontario and British Columbia. Many condominium projects are being delayed, cancelled or converted to rentals as developers miss presale targets and unsold inventory rises.

Rental markets easing

Rental conditions are gradually improving as elevated levels of new supply come online and demand softens. Vacancy rates are rising slightly in major centres, though rents continue to increase at smaller rates than recent years.

Recovery expected in 2026

CMHC anticipates a gradual housing market recovery beginning in 2026 as trade tensions ease, economic confidence improves and mortgage rates moderate. The 5-year fixed mortgage rate is expected to gradually increase to 5.5% over the long term.

Despite improving conditions ahead, affordability remains a major barrier for prospective homebuyers, particularly in higher-cost markets where many households remain priced out of the market.

CMP

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