CMHC’s Updated Forecast: Weak Sales and Falling Prices Through 2026
Canada’s housing market will remain soft for the rest of the year, according to the Canada Mortgage and Housing Corporation’s summer update to its 2026 Housing Market Outlook. The agency sees slow economic growth of just 0.7%, weak housing demand, declining home prices, lower housing starts and easing rental markets across much of the country.
CMHC points to a cocktail of headwinds: very slow population growth, high borrowing costs, modest income gains and a deep uncertainty fuelled by the ongoing U.S.-Canada trade war. The outlook “has changed little” since its last major forecast, the agency said, and it expects only a gradual improvement in sales through 2027 and 2028—still below the ten-year average.
The forecast is not uniform. Western Canada is set to lead growth, buoyed by stronger commodity prices linked to the U.S.-Iran war, while Ontario and British Columbia are forecast to struggle as affordability barriers and slower population inflows choke sales volumes. Atlantic Canada remains the weakest region, though the gap should narrow as the national economy strengthens later in the decade.
The Forces Behind Canada’s Diverging Regional Housing Fortunes
Why Ontario and B.C. Are Set to Lag
The two largest provincial markets face a double blow: home prices that remain out of reach for many households after years of rapid appreciation, and a sharp deceleration in population growth that removes a key demand driver. CMHC’s analysis suggests that even if mortgage rates stabilize, the erosion of purchasing power will keep sales volumes well below historical norms in Toronto and Vancouver, leaving sellers with longer listing periods and putting downward pressure on valuations.
The Trade War’s Direct Hit on Construction Costs
Newly announced 50% U.S. tariffs on a range of Canadian goods—retaliatory measures triggered by provincial bans on American alcohol—add a fresh layer of risk. For homebuilders, that could mean higher prices for imported building materials and components at a time when demand is already fragile. CMHC explicitly warns that the trade uncertainty will “weigh on business investment and hiring decisions,” further dampening the residential construction sector’s appetite to bring new supply to market.
Oil Prices and the Inflation Wildcard
Hostilities between the U.S. and Iran risk pushing energy costs higher. For the housing market, that translates into two opposite forces: Western Canada may get a short-term economic boost from higher commodity prices, but nationwide, a renewed bout of inflation could keep the Bank of Canada from cutting interest rates as quickly as borrowers hope. CMHC’s downside scenario sees inflation staying elevated, confidence weakening, and the recovery in home sales, prices and construction delayed further.
What the Gloomy Outlook Means for Buyers, Builders and Renters
For prospective buyers: The forecast points to further price declines through 2026, especially in Ontario and B.C., where inventories are likely to rise. However, high borrowing costs mean the improvement in affordability may be less dramatic than price drops alone suggest. Those in a position to act could find more negotiating power, but should stress-test budgets against the risk that rates stay elevated longer.
For builders and developers: The combination of weak demand and potential tariff-driven input cost increases suggests a need to reassess project timelines. Western Canada and the Prairies present relatively better near-term conditions, supported by commodity exports and steadier job markets. In contrast, starting high-rise projects in Toronto or Vancouver now carries significantly more risk than six months ago.
For renters: Easing rental markets—a direct consequence of slower population growth and rising rental supply—could mean softer rent increases or even declines in overheated cities. Tenants with leases coming up for renewal may find landlords more willing to negotiate than they have been in years.
Risk & Opportunity Assessment
| Commercial Risk | High | Soft demand and declining prices directly threaten revenues for homebuilders and developers, especially in Ontario and B.C., while potential tariff increases raise input costs. |
| Competitive Risk | Medium | Regional divergence means builders concentrated in struggling markets face a tougher competitive environment, whereas those in Western Canada and the Prairies may capture a disproportionate share of the reduced activity. |
| Regulatory Risk | Medium | Escalating trade tariffs add uncertainty to material costs; any further retaliatory measures could disrupt supply chains. Additional housing policy interventions from provincial governments remain possible if affordability deteriorates further. |
| Reputation Risk | Low | The forecast is consistent with established CMHC methodology and previous outlooks; no reputational event is indicated. |
| Technology Disruption | Low | No material technology disruption is evident in the report; the dominant factors are macroeconomic and policy-driven. |
| Commercial Opportunity | Medium | For well-capitalized investors and developers, price declines and weaker competition could create chances to acquire land or distressed projects at lower valuations, particularly if they can wait for the 2027-2028 recovery. |
Comments 0