Canadian housing starts will decline in 2024 due to a reduction in rental residential construction projects, the Canada Mortgage and Housing Corporation predicts.

The lagged effect of higher interest rates will affect new construction after housing starts reached historically high levels in recent years, says CMHC’s latest latest Housing Market Outlook (HMO).

“Purpose-built rental starts, fuelled by unprecedented demand and government support, hit record levels in 2023, sustaining overall housing starts in Canada near historically high levels,” said Bob Dugan, CMHC’s chief economist, in a news release accompanying the report. “However, unfavourable financing conditions are expected to make it more difficult for homebuilders to start new rental projects in 2024.”

The outlook provides overviews and forecasts for new home construction, rental markets, home sales and home prices. CMHC’s findings come after CMHC reported recently that a surge in apartment projects, particularly in Toronto, Vancouver and Calgary, prevented a decline in Canadian new-home construction in 2023.

CMHC predicts that Vancouver new-home construction will slow from record levels in 2023 due to higher interest rates catching up with construction timelines. Meanwhile, demand pressures will spell higher higher sales, prices and rents.

Edmonton and Calgary housing starts will remain strong amid population growth while the rental markets in both cities remain tight.

Housing starts will fall in Toronto as home prices resume growth and challenge ownership affordability. But Ottawa housing starts will rise. Rental vacancy will increase in both markets.

Montreal new-home construction will rise slightly through 2025 but will lag demand. Property prices will recover moderately, while the rental market continues to tighten due to supply and demand pressures.