Economic headwinds expected to impact housing markets: CMHC economist

Heather Wright looks at a new report by the Canada Mortgage and Housing Corporation which shows Canada's housing market is heading for a decline.

OTTAWA — TORONTO - Economic headwinds are expected to impact Canada’s housing market for the next three years, according to the Canada Mortgage and Housing Corporation’s (CMHC) 2026 Market Outlook which was released Tuesday. The agency predicts that national housing starts will fall below their 10-year average despite rental construction remaining strong.

“The general climate of uncertainty that has been brought about by trade tensions has definitely impacted housing investment and housing purchase decisions, there’s no question,” says CMHC Deputy Chief Economist Kevin Hughes, who was the lead author of the report.

The CMHC outlook predicts new home construction will decline through 2028 as developers face high costs, weaker demand and more unsold homes. The report also predicts condo construction will be especially weak.

Overall, the outlook sets 2026 real GDP growth at just 0.7 per cent, which would make it one of the weakest non‑recession years in decades. The report also cites modest income growth, slow population growth and softer labour markets as factors weighing on housing demand.

“Several factors that are really spelling out a slower market for the next several years,” Hughes says, while noting “when we go from one region to another the situation is not exactly the same.”

For example, the CMHC says condominium starts in Vancouver and Toronto would remain low due to weak presales and high construction costs. In Montreal however, purpose built rental construction is expected to remain strong this year.

Toronto realtor Daniel Zadegan says Toronto has seen a massive “dump” of completed condo units come online and many of the buyers who purchased units preconstruction are now struggling to sell them.

“A lot of the condo sellers today are folks that bought during the low-interest rate environment,” he says. With interest rates now higher and the value of condos lower, he says many clients are now selling at a loss just to offload the unit.

“As a seller of a new build, you are looking at a full deposit forfeit,” he says.

Despite the bleak outlook for the condo market in Toronto, Zadegan predicts there will be signs of improvement in the next year or so, perhaps not when it comes to price but with more sales activity. But with the current volatility of the condo market impacting new construction. Zadegan also predicts problems down the line.

“Long-term the lack of housing starts is at some point going to show it’s impact,” he says. “Maybe in a few years because starting next year the housing completions are really going to taper off.”

The CMHC has warned that Canada needs to build 3.5 million more homes than it’s on pace to build in order to restore affordability by 2030, a target economists warn is becoming increasingly difficult to hit.