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Canadian housing sales and prices are expected to improve over the next two years, according to the 2025 Housing Market Outlook published by the Canada Mortgage and Housing Corporation (CMHC).

While acknowledging “foreign trade risks and immigration changes” could disrupt an improving national economy, CMHC predicted a more vibrant housing picture despite some ongoing challenges.

“The combination of lower mortgage rates and changes to mortgage rules introduced in 2024 should unlock pent-up demand from homebuyers previously priced out of the market,” the CMHC report said. “However, some of these homebuyers may face longer loan terms, higher interest costs over the duration of the loan and larger down payments as prices continue to rise. Compared to new homes, we expect resale homes to attract a larger share of renewed demand as they offer more options for financially constrained homebuyers. In addition, the length of new construction projects may limit developers’ ability to meet demand quickly.”

CMHC pointed to millennials as the driving force among homebuyers, adding that many members of this demographic are first-time buyers who will be looking for housing closer to their jobs as remote work declines in favor of return-to-work requirements.

“We also expect some repeat homebuyers to return to the market,” the CMHC report continued. “This will include those looking to upgrade, taking advantage of lower mortgage rates. It also includes homeowners who purchased during the pandemic, facing mortgage renewals between 2025 and 2027. These factors may lead them to rethink their housing needs, driving sales activity.”

However, there will be some hiccups in the next two years, most notably with a condominium apartment market that will not be as vibrant in regions depending on investor activity. Still, CMHC is expective an increase in listings due to a record level of new condominium apartment completions and the softening of rental housing markets.

As for homeownership affordability, the situation will take a little time to settle down in favor of buyers.

“Prices will grow faster in 2025, reflecting a recovery and renewed demand for ground-oriented homes, before slowing down in 2026 – 2027,” the report said. “By 2027, we expect much of the pent-up demand to be met. Although mortgage payments and prices will rise, improved job markets and income growth will make housing more attainable than during the 2022 – 2024 period. This will support further recovery in sales.”

But affordability will vary by province, the CMHC warned, with Ontario and British Columbia being “particularly unaffordable” while the “more affordable Alberta and Quebec markets began recovering in early 2024.”

As for rental housing CMHC noted that supply began to accelerate in 2024, but affordability was often elusive.

“We expect lower immigration and an increase in first-time homebuyers to continue to reduce rental demand throughout 2025 – 2027,” the report predicted. “Supply will continue to expand as new rental units are completed, leading to higher vacancies and slower rent increases. However, rental affordability will take more time to improve. Some vacated units will adjust to market rents and renters’ incomes will catch up to previous market rent increases. Additionally, as financially able tenants move to higher-priced new units, more affordable options will gradually open up for other tenants.”