Canadian housing-construction starts will slow down in 2025 primarily due to a decline in new condominium-apartment projects, according to a Canada Mortgage and Housing Corporation (CMHC) report released Wednesday.

Despite the slowdown, overall housing starts will remain above their 10-year average, with rental-apartment construction continuing at high levels, though potentially easing by 2027 as demand stabilizes, said CMHC in its 2025 housing market outlook.

Foreign Trade Risks and Economic Uncertainty

CMHC warned that U.S. President Donald Trump’s threatened U.S. tariffs on imports from Canada could significantly impact the Canadian housing sector and economy as a whole.

“With Canada’s economic future facing significant uncertainty due to changes in U.S. trade policies, the Canadian housing market could face considerable headwinds in both the short and medium term,” said CMHC in a news release that accompanied the report.

“The possibility of tariffs reaching up to 25% on Canadian goods may lead to investment uncertainty, a weaker Canadian dollar, lower export revenues, job losses, and increased inflation, heightening the risk of a recession.”

The federal housing agency also noted that recent reductions in immigration targets for 2025-2027 could further dampen economic activity.

Rental-apartment Construction Outlook

CMHC predicts that rental-apartment construction momentum momentum may slow by 2027 after surging to record levels in 2024 amid government financial incentives and strong demand.

The potential for higher vacancy rates and moderating rent growth could make new projects less financially viable, although construction is expected to remain robust in the near term.

Housing Sales and Prices to Rebound Unevenly

CMHC anticipates that housing sales and prices will rebound as lower mortgage rates and revised mortgage regulations unlock pent-up demand. However, the recovery will be uneven, with affordability challenges persisting in high-cost markets such as Ontario and British Columbia. In contrast, more affordable regions, including Alberta and Quebec, are expected to see stronger sales and price growth.

CMHC also pointed to a shift in buyer preferences, with more interest in ground-oriented homes, such as row houses, rather than condos. Investors, facing rising costs and lower rental income potential, are increasingly selling pre-construction units, adding to supply in the market.

Rental Market and Affordability

The rental market is expected to rebalance as increased supply outpaces new demand, driven by lower immigration levels and more renters transitioning to homeownership. As vacancy rates rise, rent growth is projected to slow, gradually improving affordability. However, CMHC cautions that meaningful affordability gains will take time, as wages need to catch up with previous rent increases.

CMHC’s outlook came after the organization reported that the apartment-construction surge prompted a 2% rise in total Canadian housing starts in 2024.

The agency did not release detailed forecasts for major markets. It plans to do so at the end of February.

Photo: CMHC