Canada’s housing market faces an uncertain future in 2025 as shifting geopolitical and economic conditions create an unpredictable landscape, according to the latest Housing Market Outlook from the Canada Mortgage and Housing Corporation (CMHC).
The report highlights key risks, including potential U.S. trade tariffs and reduced immigration targets, both of which could slow economic growth and influence housing demand in unexpected ways.
Despite these uncertainties, CMHC projects a modest economic recovery beginning in 2026, with housing sales and prices expected to rebound as lower mortgage rates and policy changes unlock pent-up demand.
Geopolitical and economic pressures cloud the forecast
CMHC notes that Canada’s economic outlook is clouded by the possibility of increased U.S. trade restrictions, which could see tariffs of up to 25 per cent on Canadian exports. Such a move would weaken the Canadian dollar, reduce investment confidence and potentially drive up inflation, increasing the risk of a recession.
The housing market is directly tied to these macroeconomic trends, as job losses and financial uncertainty could dampen buyer confidence. At the same time, the federal government’s decision to scale back immigration targets between 2025 and 2027 may further constrain housing demand, particularly in high-cost urban centres where newcomers have traditionally bolstered the rental and resale markets.
Despite these headwinds, CMHC expects housing activity to improve in the short term, thanks to lower mortgage rates and regulatory changes that make homeownership more accessible.
Slower housing starts, but resale market gains strength
While affordability challenges will persist, particularly in provinces such as Ontario and British Columbia, where housing prices remain high compared to income levels, CMHC forecasts a shift: resale homes will likely capture the bulk of renewed demand, while new home construction is expected to slow, particularly in the condo sector.
Developers face increasing difficulty selling pre-construction units, especially in markets heavily dependent on investor activity. As a result, CMHC projects fewer condo starts over the next three years, though overall housing starts are expected to remain above their 10-year average.
Detached, semi-detached and row houses, may see a slight recovery, particularly in more affordable regions. Alberta and Quebec, which have lower price points compared to Ontario and British Columbia, are expected to experience stronger-than-average housing demand.
Rental market sees signs of easing
The rental market, which has been under pressure due to record-low vacancy rates, is expected to see further relief as new supply comes online and demand eases slightly. While rent increases may slow, significant affordability improvements will take time. Lower immigration levels and an increase in first-time homebuyers moving into ownership will gradually reduce rental demand.
At the same time, a cooling rental market, combined with an increase in resale listings from investors offloading condo units, could create new opportunities for renters looking to transition into homeownership. Affordability will remain a key challenge, as incomes continue to lag behind the rapid rent growth seen in recent years.
Three possible scenarios for the housing market
CMHC acknowledges that the outlook remains highly uncertain and for that reason does not identify a base case, but rather presents three potential scenarios to account for the various economic and policy shifts that could shape the market.
In a low-growth scenario, a deeper economic slowdown could delay housing recovery, leading to prolonged affordability issues and fewer homes being built. In contrast, a high-growth scenario would see stronger economic fundamentals, lower mortgage rates, and a stable immigration policy accelerating housing demand and pushing prices higher.
For now, CMHC’s medium-growth scenario suggests a gradual housing recovery beginning in 2025, with stronger momentum in 2026 and 2027. While some regions, particularly those with more affordable housing markets, are expected to see higher-than-average price growth, more expensive markets will experience a slower recovery.