Canada Mortgage and Housing Corporation (CMHC) predicts average home prices will likely decline in 2026 and then rise slowly, while housing starts will continue to fall throughout 2027 and 2028 due to weak demand, high costs and elevated inventories.
In the summer update to its 2026 Housing Market Outlook, CMHC states that housing activity will likely remain weak in the near term, as very slow population growth, uncertainty, high borrowing costs and modest income growth continue to limit demand. Sales will gradually improve over the next two years, but are expected to remain below levels typically seen in the last decade.
Housing forecast
Improved affordability alone hasn’t been enough to bring many buyers back into the market. So far in 2026, housing market activity has been weaker than expected, particularly in sales and prices.
As economic growth and income gains strengthen in 2027 and 2028, CMHC predicts that buyer confidence should improve, and housing demand should gradually recover from these weak levels.
Yet conditions will differ across regions. Market momentum is expected to keep sales high in Prairie and Quebec markets. In contrast, British Columbia and Ontario will likely continue to struggle with historically weak sales levels due to affordability challenges and slower population growth.
House prices are expected to decline through 2026 and then grow only modestly afterward. Overall, very slow population growth and limited income gains should keep price increases moderate across the country.
Prairie markets will likely lead price growth because demand remains strong in that region, while Quebec should see modest gains due to more balanced market conditions. British Columbia and Ontario are likely to see the weakest growth because of slower population growth, affordability challenges and higher supply.
Subdued housing demand will also impact new construction. Housing starts are expected to further decline as builders continue to respond to unsold inventories and high construction costs. Historically low levels of construction will be most visible in Ontario and British Columbia, particularly in the condominium market. Housing starts in the Prairies and Quebec will also decrease, but from recent peaks. Rental construction is expected to ease gradually from its historic 2025 peak. CMHC states that maintaining a sustainable level of rental construction will support future housing needs, particularly as demand should materialize towards the end of the forecast horizon.
New supply is increasing, especially from purpose-built rental projects. This will help lift vacancy rates and slow average rent growth, particularly for asking rents. This easing is more noticeable in larger markets such as Toronto and Vancouver, which are more affected by slower population growth and a larger supply of condominiums in secondary rental markets. In contrast, Prairie markets will likely continue to see modest rent increases, reflecting stronger demand.
Although overall rental conditions are improving, affordability remains a challenge. Rents are still high relative to income, especially when units turn over.
CMHC explained that an alternative scenario could lead to different market impacts. “Inflation could remain high if the U.S.-Iran war drives oil prices higher and further disrupts supply chains, or if trade tensions intensify,” it states. “This would further weaken confidence and slow income growth. In this case, housing demand would remain soft for longer. Home sales, prices and construction would recover more slowly, and rental markets would continue to ease as supply outpaces demand.”
