Canada’s high home prices to drive rent up further in the next three years: CMHC
While Canada’s home prices have declined from the historic highs during the pandemic, a new report says that’ll change going into 2024, and it’ll put immense pressure on the rental market.
The Canada Mortgage and Housing Corporation (CMHC) released its latest Housing Market Outlook (HMO) report Thursday morning, and the findings are depressing.
According to the CMHC, home prices are expected to stabilize mid-2023, but will continue to increase from that point through the end of 2025.
Our latest #Housing Market Outlook is available now.
Price/sales declines are expected between 2022-2023, but we also expect these declines to bottom out sometime in 2023.
This is due to the stabilization of interest rates.
— CMHC (@CMHC_ca) April 27, 2023
“Price increases, combined with higher mortgage rates and a long-term lack of supply of new housing, will continue to make homeownership less affordable for prospective buyers,” reads the report.
The CMHC says the lack of housing affordability will keep a lot of people in the rental market, which is already facing severe supply shortages, especially in Toronto, Vancouver and Montreal.
On top of that, the number of people looking to rent will grow. The report says this is in part due to high immigration levels.
All of this will increase demand for rental units, and therefore drive rent up further in the next three years, reads the HMO.
CMHC Chief Economist Bob Dugan says there is some good news.
“With inflation coming back to the 2% target by the end of the forecast period, mortgage rates will gradually decline, supporting both housing demand and a recovery in the construction of new housing supply,” Dugan said in a statement.
While the corporation’s analysis did find a significant drop in new housing projects in 2023, it forecasts some recovery leading into 2024 and onwards.
But Dugan adds that demand for housing will still outpace new supply, so “affordability challenges will persist for owners and renters.”
The forecast also highlights key findings from each province.
It found that rental affordability in Toronto and Vancouver will decline due to demand outpacing supply.
The Prairie provinces can expect more positive housing market conditions due to interprovincial migration and affordable homeownership.
Ontario, BC and Québec won’t have as much luck. The report says these provinces will see a significant drop in new housing projects compared to other regions.