Forecasting Canada’s Housing Market in 2025: What to Expect Amid Uncertainty
As we step into 2025, Canada’s housing market is poised for notable shifts. While uncertainty remains, insights from the latest CMHC Housing Market Outlook provide valuable clues about what homeowners, renters, and investors can expect in the coming year. With economic conditions evolving and key policy changes on the horizon, let’s break down the forecast for 2025 and beyond.
Economic Recovery and Interest Rates
Canada’s economy is expected to see modest growth in 2025, with stronger momentum anticipated by 2026-2027. The good news for homebuyers? Lower mortgage rates are expected to stimulate home sales and bring some relief to affordability-strained markets. As interest rates continue to decline, mortgage qualification may become easier, allowing more buyers to enter the market.
However, potential economic headwinds, including the possibility of U.S. trade tariffs, could create mixed impacts on Canada’s economy and, by extension, the housing market. While lower borrowing costs will encourage consumer spending and investment, external economic factors could temper growth.
Home Sales and Price Recovery
After a challenging period of high interest rates, home sales and prices are expected to recover in 2025. More affordable regions like Alberta and Quebec are projected to lead the way in sales and price increases, while high-priced markets like Ontario and British Columbia may continue to face affordability challenges.
For those considering buying or selling a home, this shift means that demand could increase as more buyers re-enter the market. However, price growth will likely be gradual, with regional variations playing a significant role in determining market conditions.
New Home Construction: A Slowdown in Condo Development?
One of the more significant changes forecasted for 2025 is a moderation in new home construction. Although housing starts are expected to remain above their 10-year average, a decline in condominium construction is anticipated. This is largely due to weakening interest from investors and developers who are more cautious amid fluctuating demand and changing market conditions.
This shift could have implications for buyers seeking newly built homes, particularly in urban centers where condos have traditionally played a major role in housing supply. On the other hand, developers focusing on purpose-built rental housing may continue to see strong demand.
Foreign Trade Risks and Immigration Changes Add Uncertainty
According to the CMHC’s 2025 Housing Market Outlook Highlights, foreign trade risks and shifts in immigration policy are adding new layers of uncertainty to the housing forecast. Economic activity is expected to remain modest in 2025, with a stronger rebound projected for 2026 and 2027.
Housing starts will slow down from 2025 to 2027, mainly due to a decline in condominium construction. However, total housing starts will still remain above their 10-year average. While rental apartment construction is expected to stay high in the near term, it may start to slow by 2027 as demand eases. Ground-oriented homes, such as detached, semi-detached, and row homes, may see a slight recovery—especially more affordable options like row houses.
Sales and prices are projected to rebound as lower mortgage rates and adjusted mortgage rules unlock pent-up demand. Over the long term, stronger economic fundamentals will help sustain this recovery, though progress will be uneven. Less affordable regions and the condo market may take longer to bounce back.
The rental market is expected to see higher vacancy rates, which should help slow rent growth. While renter affordability will gradually improve, noticeable changes will likely take longer, extending beyond 2025.
Housing Market Recovery: What to Expect
Despite economic headwinds, Canada’s housing market is positioned for improvement. Lower mortgage rates and adjustments to mortgage qualification rules introduced in 2024 will help unlock pent-up demand, allowing many homebuyers who were previously priced out of the market to enter. However, challenges remain, including longer loan terms, higher overall interest costs, and larger down payments due to rising prices.
Resale homes are expected to attract more demand than newly built homes, as they offer more choices for budget-conscious buyers. New home construction projects take time, limiting their ability to respond quickly to renewed buyer interest.
Millennials, especially first-time buyers, continue to drive housing demand. As remote work trends decline, many of these buyers are prioritizing homes closer to job centers, potentially leading to increased sales in larger urban markets.
Additionally, some repeat buyers will re-enter the market, particularly those looking to upgrade as mortgage rates decrease. Homeowners who purchased during the pandemic may also reassess their housing needs when facing mortgage renewals between 2025 and 2027, further fueling market activity.
However, the recovery will not be uniform across all property types. The condominium market is expected to lag, particularly in regions where investor activity has played a key role. Rising costs and slower rent growth are prompting some investors to sell pre-construction units rather than hold onto them. As a result, condo listings may continue to rise in 2025, driven by record-high completions and softening rental demand.
Regional Market Differences
The most affordable regions are expected to lead the recovery in sales and prices. Alberta and Quebec, which began recovering in early 2024, are projected to experience historically high sales levels, with price growth outpacing the national average.
In contrast, Ontario and British Columbia will likely see slower recoveries due to ongoing affordability challenges. Sales in these markets may remain below their 10-year averages, and price growth is expected to be more moderate—especially in the early part of the forecast period.
Housing Starts: A Shift in Construction Trends
Housing starts are expected to decline but will still remain above their 10-year average. The slowdown is largely driven by fewer condominium apartment projects, as investor demand weakens. Rising unsold inventory will likely reduce the launch of new projects, leading to a decline in condo construction.
Regional breakdown:
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Ontario: Pre-construction condo sales will decline due to weaker investor interest and slower resale and rental markets, leading to reduced new developments.
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British Columbia: The slowdown in condo construction will be less pronounced as resale demand remains relatively strong.
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Alberta: New construction will be less affected, as the province’s housing demand is driven more by end-users than investors.
Meanwhile, rental apartment construction surged in 2024, supported by government initiatives and strong rent growth at the time of planning. This momentum will continue through 2025 and 2026, but as rental market conditions soften, new rental projects may decline starting in 2027.
A slight recovery in ground-oriented home construction is expected, particularly in lower-cost housing segments. First-time buyers may prefer resale options due to better supply and pricing, while developers will face limitations in competing with resale markets due to higher costs and narrower profit margins.
Rental Market Trends: Balancing Supply and Demand
Since 2024, rental supply has grown faster than demand, but affordability remains a challenge. Lower immigration levels and an increase in first-time homebuyers are expected to further reduce rental demand through 2025-2027. At the same time, the completion of new rental projects will increase supply, leading to higher vacancy rates and a slowdown in rent growth.
However, rental affordability improvements will take time. As some financially stable tenants move into newly built, higher-priced units, more affordable rental options will gradually open for others. Market rents will also need to align with renters’ incomes, creating a more balanced rental landscape over time.
Canada’s housing market in 2025 is expected to be shaped by lower mortgage rates, shifting construction trends, and evolving affordability challenges. While some relief is on the horizon, particularly for buyers and renters, regional differences will continue to play a significant role in market conditions.
As we navigate these changes, staying informed about market trends and working with a knowledgeable real estate professional can help you make the best decisions for your housing goals. Whether you're looking to buy, sell, or invest, understanding the evolving market landscape will be key in 2025.
Find the Full Report Here: 2025 Housing Market Outlook
If you're planning a move in Brantford or Brant County, reach out today for expert guidance on navigating the changing real estate market! Jody and Paula Tysoski Real Estate