Home prices in Canada are about to explode report finds

The cost of buying a home in Canada has become increasingly impossible for many in the country but things will soon get a lot worse according to a report from the country’s national housing agency. 

Existing housing prices are forecasted to rise 20% over the next three years based on the latest data from the Canada Mortgage and Housing Corporation (CMHC) because of cuts to interest rates. 

The average sale price of a home in Canada at the end of 2024 is expected to reach as high as $711,429, which Better Dwelling reported was a 4.9% advancement from home prices in the previous year. 

Canadian home prices will see explosive growth in 2025. CMHC is forecasting a 9.5% jump in the cost of housing while 2026 will see a moderate rise of 4.6%. The baseline price will rise to $815,851. 

Better Dwelling reported that the difference between the baseline prices of housing in 2024 will rise by 20% before the end of 2026. Most of the activity is forecasted to take place in smaller cities.

“Demand for homes will push prices up throughout the projection horizon,” the CMHC report noted. “By 2025, prices could reach the peak level recorded in early 2022 and surpass it in the following year.”

“Affordability will therefore be a growing concern,” the report added before noting that the rise in costs would be fuelled by declining mortgage rates as well two other factors that the report explained.   

Expected interest rate cuts aren’t the only factors having an impact on the forecasted rising cost of housing in Canada. Pressure will be placed on demand by the country’s growing population. 

“Strong population growth recorded in 2023, the highest since the 1950s, will continue into 2024. This will contribute to the recovery in sales,” the report’s authors explained, and it makes a lot of sense. 

Canada will take in roughly 1.5 million new immigrants from 2024 to 2026 according to the government’s plans, which means that the population will continue to rise at a time when housing is in trouble. 

In September 2023, a CMHC report noted that Canada would need at least 3.5 million more units than were already being built in order to meet the housing requirements of the country’s population in 2023. 

However, another major issue pointed out by the most recent CMHC report was that a rise in prices would be tied to a shift in demand toward lower-priced homes in markets all across the country. 

“We project sales levels in 2025 – 2026 to slightly surpass the past 10-year average but remain below the record 2020 – 2021 levels because housing will remain expensive for the average household,” the report noted. 

Rental demand will also continue to outstrip supply. This will lead to an increase in new rental unit construction but the increase will not be able to meet the growing demand as the country’s population grows. 

CMHC reported that it only sees a baseline level of 224,485 housing starts in 2024 followed by 232,276 in 2025 and 232,084 in 2026, meaning over the next three years Canada will only likely build 688,845 new units. 

“Canada’s national housing agency sees all of this occurring against a backdrop of a weaker economy,” Better Dwelling explained in its analysis of CMHC's report. So the next few years could be quite difficult for homebuyers.

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