Weak demand, high borrowing costs and trade uncertainty to keep prices falling this year
Canadian home prices are on track to fall further in 2026 before a modest rebound begins in 2027, as elevated borrowing costs, sluggish population growth and broader economic uncertainty keep buyers on the sidelines.
New forecasting from Canada Mortgage and Housing Corporation, a mid-year update to its 2026 Housing Market Outlook, projects that national home sales will only gradually climb back over the next two years, still falling short of the pace seen over the past decade. CMHC also published updated forecasts covering 18 individual markets across the country.
The agency pointed to a mix of pressures weighing on the broader economy, including the ongoing conflict between the US and Iran, which is expected to push inflation temporarily higher, alongside persistent friction in Canada-US trade relations that continues to dampen business investment and hiring.
Regional performance is expected to diverge sharply. Prairie provinces are forecast to hold onto stronger sales volumes and post the strongest price gains nationally, while Quebec's more balanced conditions should produce steadier, if modest, increases. Ontario and British Columbia, by contrast, are expected to keep struggling with affordability pressures and softer overall activity.
CMHC expects housing starts to decline through the forecast window as builders contend with soft demand, swollen inventories and elevated building costs. That slowdown is expected to hit Ontario and British Columbia's condo sector particularly hard, even as construction activity in the Prairies and Quebec cools from its recent highs.
Rental market
On the rental side, new supply is expected to keep easing back from the peak reached in 2025. CMHC cautioned that keeping rental construction at a sustainable pace will matter more as the economy strengthens later in the forecast period and additional renter households enter the market.
Vacancy rates are climbing in major centres such as Toronto, Vancouver and Montreal, which should slow the pace of asking-rent increases there, while Prairie rents are expected to see modest growth on the back of comparatively firmer demand. Even so, rents relative to income are expected to remain a persistent strain nationwide.
Kevin Hughes, CMHC's deputy chief economist, said falling prices alone haven't been enough to lure buyers back into the market.
"Price reductions have not yet been enough to bring demand back into the market as economic uncertainty, income growth and borrowing conditions all have played a role in sidelining buyers. We expect conditions to improve over the medium-term, however, housing construction should remain suppressed as the industry factors in today's elevated inventories and weaker demand," Hughes said.
