CMHC’s 2025 Housing Market Outlook: Key Risks and Projections
With rising trade tensions between Canada and the U.S. and a reduction in immigration targets, economic uncertainty remains high. Rather than a single base case forecast, CMHC presents three potential housing market scenarios, each shaped by different levels of trade disruption.
Housing Market Outlook: A Mixed Recovery
Despite these challenges, CMHC anticipates a rebound in housing activity in 2025, fueled by lower mortgage rates and pent-up demand from buyers sidelined by high borrowing costs. However, affordability constraints and regional disparities will lead to an uneven recovery across the country.
Trade Tensions: A Major Risk Factor
CMHC warns that Canada’s trade relationship with the U.S. poses one of the biggest risks to the housing market. If the U.S. imposes tariffs of up to 25% on Canadian exports, economic growth could weaken, leading to investment uncertainty and job losses. Canadian retaliation with counter-tariffs would further strain economic conditions.
In a moderate scenario, where the U.S. enacts a 25% tariff on 10% of Canadian goods and Canada responds similarly, the economic fallout could be tempered by increased U.S. government spending, sustaining demand for imports. However, more aggressive trade measures could push Canada into a recession by 2025, driving unemployment higher and further weakening the dollar.
Impact of Immigration Policy Changes
Shifts in immigration policy will also play a role in shaping the housing market. The federal government’s decision to lower immigration targets from 2025 to 2027 will slow population growth, impacting both economic activity and housing demand. While the reduction will be phased in gradually, fewer newcomers could result in weaker rental demand and a slowdown in home sales.
As these factors unfold, CMHC highlights the importance of monitoring economic shifts closely, as trade policy, interest rates, and immigration will collectively determine the trajectory of Canada’s housing sector in the years ahead.
Condo Market Faces Headwinds as Housing Starts Decline
The condominium market is expected to lag behind other housing segments, particularly in regions where investors have historically driven pre-construction sales. Rising financing costs, coupled with a record number of condo completions in 2025, will likely increase resale listings, further dampening demand.
CMHC projects a slowdown in housing starts over the next three years, largely due to waning investor interest in pre-construction condos. Developers are struggling to secure enough pre-sales to fund new projects, especially in Ontario, where a weaker resale and rental market is discouraging new condo development.
In contrast, British Columbia’s condo market is expected to show more resilience, as strong resale activity helps maintain stability. Meanwhile, Alberta—where end-users make up the majority of buyers—will see minimal impact on new construction.
Rental Market Shifts as Supply Outpaces Demand
The rental market is also undergoing a transformation. Since 2024, rental supply has been expanding faster than demand, leading to higher vacancy rates and a slowdown in rent growth. This trend is expected to persist through 2025 and beyond, especially as lower immigration levels contribute to weaker rental demand.
While rental affordability is projected to improve gradually, many tenants will still face financial challenges, as market rents remain elevated. Over time, as higher-income renters move into newly built rental units, more affordable options may emerge in the existing rental market.
Alternative Scenarios: Uncertainty Shapes Housing Outlook
CMHC acknowledges that the housing market’s trajectory remains highly uncertain, influenced by trade tensions, interest rates, and government policy decisions.
In a low-growth scenario, higher U.S. tariffs could trigger a Canadian recession, delaying the housing recovery until late 2026. This would result in a further slowdown in homebuilding, persistent tightness in rental markets, and continued pent-up demand as prospective buyers remain sidelined.
Conversely, a high-growth scenario envisions fewer and shorter-lasting tariffs, coupled with strong U.S. government spending, providing a boost to Canada’s economy. Under these conditions, lower borrowing costs, improved job growth, and rising consumer confidence would accelerate housing demand. This could make homeownership more attainable, driving prices upward at a faster pace.