CMHC’s forecast for housing market in 2025 unveiled
The Housing Market Outlook (HMO) for 2025 by the Canada Mortgage and Housing Corporation (CMHC) provides valuable insights into the factors that will influence the housing sector in the country over the next three years. The report highlights the impact of economic uncertainties, changing immigration policies, and fluctuations in interest rates on the housing market.
With trade tensions escalating between Canada and the United States and a potential decline in immigration targets, the economic outlook is clouded by uncertainty. CMHC’s report outlines three potential economic scenarios, each contingent on different levels of trade disruptions and their impact on the housing market.
Despite the inherent risks, CMHC anticipates an improvement in housing activities in 2025 due to lower mortgage rates and pent-up demand from buyers who were previously deterred by high borrowing costs. However, challenges related to affordability and regional disparities are likely to affect the pace and extent of the housing market recovery.
The imposition of tariffs by the US on Canadian exports poses a significant risk, potentially leading to weaker economic growth, investment uncertainties, and job losses. The report warns that retaliatory measures by the Canadian government could exacerbate economic conditions, resulting in adverse outcomes such as recession, rising unemployment, and a devalued dollar.
Changes in immigration policies are also expected to impact the housing market dynamics in Canada. A reduction in immigration targets over the next few years will result in slower population growth, influencing economic activity and housing demand. While the implementation of reduced immigration targets will be gradual, it is likely to translate into weaker rental demand and slower home sales growth.
Despite these challenges, CMHC foresees modest economic growth in 2025, with further improvements expected in the subsequent years as economic conditions stabilize. The Bank of Canada is projected to lower interest rates to support economic recovery, potentially reducing borrowing costs for consumers. This adjustment is likely to benefit buyers interested in variable-rate mortgages, making them a more attractive financing option.
The housing market is expected to witness an uptick in activity in 2025, fueled by lower interest rates and modifications to mortgage qualification criteria that will facilitate access to previously unattainable properties for potential buyers. However, persistent affordability issues may persist as home prices continue to escalate, prompting some buyers to opt for extended mortgage terms, increased borrowing costs, and larger down payments.
While the resale housing segment is anticipated to experience a surge in activity, new home construction may lag behind due to the challenges faced by developers in negotiating high costs and stringent financing conditions. Millennials, who have deferred home purchases due to affordability concerns, are likely to drive demand for housing, particularly in major urban centers such as Ontario, British Columbia, Quebec, and Alberta.
The return of repeat buyers to the market, coupled with the influx of homeowners looking to upgrade their properties or refinance their mortgages, is expected to boost sales activity. The anticipated decline in interest rates could prompt existing borrowers to reassess their housing needs, potentially leading to an increase in sales and refinancing transactions.
However, the condominium market may face challenges, especially in regions where investors have been instrumental in pre-construction sales. Rising prices and shifting market dynamics could pose obstacles for this segment of the housing market, requiring strategic planning and adaptability from investors and developers alike.
