Canada’s national housing agency is forecasting things are going to get worse in the next few years. The CMHC’s latest forecast expects a booming population and lower rates driving housing demand. As a result of the surging activity, existing home prices are expected to rise over the next couple of years. Despite soaring demand and prices, along with their helicopter money to stimulate development, they actually see annual new home starts falling over this period.
Canadian Home Prices Forecast To Surge 20% Over 2 Years
The CMHC sees existing home prices ripping higher as interest rates are cut. By the end of this year, they expect the average sale price to rise to $711,429—advancing 4.9% from last year. Explosive growth is forecast for 2025 (+9.5%), seen moderating in 2026 (+4.6%). Their baseline forecast has the average existing home fetching $814,851 by 2026, or 20% higher than last year. Most of the activity is forecast to occur in smaller, more affordable cities.
Canadian Real Estate Sales Are Forecast To Rise
Cheaper mortgage credit is also seen boosting existing home sales, but they’ll remain weak. Last year CREA reported the fewest purchases since 2008, so it’s an easy beat. This year the CMHC is forecasting 482,244 existing home sales, an increase of 9% from last year.
They see it followed slower growth in 2025 (+7.9%), and 2026 (+1.1%), ending the period with 525,991 existing home sales in their baseline forecast. An improvement, but the volume is still significantly lower than 2021.
Annual New Home Starts Forecast To Fall Significantly
The CMHC helicopter cash to incentivize development isn’t forecast to help much. The agency sees just 224,485 new home starts this year, a decline of 9% from last year. A slight bump is observed in 2025 (+3.5%), but 2026 doesn’t see much growth from there. By the end of the forecast period in 2026, annual new home starts are expected to be 3% lower than last year.
Canada’s national housing agency sees all of this occurring against a backdrop of a weaker economy. Prior to 2020, a weak economy wasn’t exactly considered a fundamental driver of price and home purchasing. Low rates stimulate purchasing activity and facilitate price growth, but usually it’s after a market bottom. Labor market erosion isn’t typically a big driver of home purchasing.
