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2024 Housing Market Outlook
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2024 Housing Market Outlook
Explore the latest trends in Canada’s housing market, covering new homes, resales and rentals. Gain insights on affordability, supply and other key issues in Canada’s census metropolitan areas. Dive into forecasts for major markets and localized insights to make informed housing decisions.
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National
Highlights
- Economic growth outlook: Expecting weak economic growth in 2024. We’re projecting a momentum regain in 2025 – 2026 as interest rates decrease.
- Housing starts prediction: Expecting lower housing starts in 2024. There is a slight improvement forecasted over the next 2 years. Supply challenges, notably the lagged effects of higher interest rates, mean that new construction in 2025 – 2026 won’t reach 2021 – 2023 levels.
- MLS® price forecast: Forecasting demand to push MLS® prices beyond previous peak levels. This indicates a lack of short-term affordability improvement.
- MLS® sales rebound: Foreseeing an increase in MLS® sales due to strong population growth. Sales are expected to surpass the past 10-year average levels but remain below the record levels of 2020 – 2021. This is reflective of decreased housing affordability.
- Rental housing demand: Despite more rental completions, growing demand for rental homes will not be met because the cost of homeownership will lead households to stay in rental housing. Rents will rise and vacancy rates will fall.
Forecasting economic insights and housing trends in 2024 and beyond
Interest rates increases that started in early 2022 to combat inflation resulted in weaker economic growth. This, in turn affected the housing market. Higher mortgage rates made things more difficult for potential homebuyers, leading to less homeownership demand and weaker house price growth.
Higher interest rates made it challenging for builders and developers to get financing. This immediately slowed the construction of smaller buildings such as single-detached homes. We expect interest rate increases to slow apartment starts in 2024. The increased level of apartment starts in 2023 was likely the result of financing secured before interest rates began to rise.
Demand will return and growth in sales and prices will increase as inflation and interest rates decrease. With the weakness in housing supply, affordability challenges will continue. These challenges will be most evident in the rental sector. The 2 key factors that will influence the record-low vacancy rates and rent increases on unit turnover in 2024 are:
- The higher costs of homeownership driven by elevated interest rates.
- The reduction in the construction of rental buildings that will further impact the rental market dynamics.
We expect a gradual rebound after a weak 2024
We anticipate weak growth in gross domestic product in 2024 with economic momentum gradually increasing throughout 2025 – 2026.
Consumers were a significant driver of post-pandemic economic recovery, but their spending capacity in 2024 will be constrained by high price levels and interest rates. Moreover, Canadians who financed homes during the pandemic will renew their mortgages at higher rates throughout 2024 – 2027.
Because of the uncertain economy and people's net worth (relative to net income) dropping in 2023, households may spend less money. Reduced consumption has been masked by record population growth stemming from immigration. Per capita household spending has already declined over the last 3 quarters of 2023.
Rising production costs and decreased demand will put pressure on Canadian businesses. Labour market conditions will likely loosen in 2024, with companies unable to absorb a significantly higher labour supply. As a result, the unemployment rate is forecasted to rise by more than 1 percentage point to 6.5% in 2024, which remains slightly below the 10-year average.
To support the slowing economy and booming population, government spending will increase in 2024 and will grow more moderately thereafter.
We expect inflation to fall to the mid-2% range by mid-2024 and then stabilize in the low 2% range in 2025 – 2026. This decline will let the Bank of Canada gradually lower its policy rate from mid-2024.
Anticipated higher real personal disposable incomes and lower interest rates in 2025 – 2026 should gradually increase consumer confidence, stimulating a rebound in GDP growth.
Housing starts decline in 2024 with partial rebound projected for 2025 – 2026
We anticipate housing starts will decline in 2024, continuing the decline from the record high levels of 2021.
Interest rate increases led rapidly to declining starts of smaller structures, particularly single-detached starts.
We anticipate a decline in apartment starts in 2024, following their record-high levels in 2023. Purpose-built rental starts, fueled by unprecedented demand and government support, accounted for over half of these starts. However, unfavourable financing conditions are expected to make more new rental projects unfeasible in 2024.
Some condominium projects may also face delays in 2024. Lower pre-construction sale levels will make securing financing harder. Additionally, despite labour shortages and rising construction costs, developers are handling a record number of units already in development.
In 2025 – 2026, lower interest rates, milder construction cost growth and government support should make more projects viable. Homebuyers can also expect lower interest rates as real incomes and confidence levels improve. Consequently, more homes are expected to be built in 2025 – 2026.
Regional outlook: Ontario and B.C. face challenges, while Prairie provinces thrive
- The Prairie provinces are expected to perform well due to their affordable home prices and stronger economic outlook. This attracts homebuyers and job seekers, leading to increased home construction with fewer constraints on skilled workers.
- Ontario and British Columbia are expected to drive the decline in national housing starts for 2024. High home prices will make certain home types unaffordable, while developers may struggle even with apartment construction because of supply-side challenges, particularly financing costs.
- Quebec housing starts are expected to grow more robustly compared to those in other regions as they realign with fundamental levels but remain below post-pandemic levels. Quebec experienced a sharp decline in new home construction in 2023, before other provinces did.
- In the Atlantic region, the pressure on new home construction due to unusually strong migration in 2022 – 2023 will ease. Housing starts in certain provinces will remain historically robust but will realign more closely with weaker population growth over the forecast period.
Sales and prices will rise in the coming years
Demand for homes will push prices up throughout the projection horizon. 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.
We anticipate a rebound in MLS® sales and prices from 2024 to 2026, fueled by declining mortgage rates alongside stronger growth in population and real disposable incomes. Sales dropped by about one third from their early 2021 peak to the end of 2023. Prices fell by nearly 15% in the same period. During this time, the pool of potential homebuyers grew through robust population growth, increased savings and higher incomes. As mortgage rates and economic uncertainty decrease in the second half of 2024, we expect buyers to start returning to the market.
Strong population growth recorded in 2023, the highest since the 1950s, will continue into 2024. This will contribute to the recovery in sales. This resurgence will also be driven by a shift in demand towards lower-priced homes and markets across Canada.
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.
Rental demand will continue to outpace supply
Despite some recovery in homeownership demand, many households will struggle to afford homes in 2024 – 2026, leading to increased demand for rentals. Strong population growth will further increase rental housing demand because newcomers tend to rent after arriving in Canada.
We anticipate an increase in purpose-built rental completions over the forecast horizon due to the record number of projects started in 2021 – 2023. However, this increase will not meet the growing demand. As a result, rental markets will remain tight, particularly in the pricier areas of Canada.
Alternative scenarios address elevated levels of uncertainty
To address significant economic uncertainty, we present 2 alternative scenarios and their housing market implications.
Relative to our baseline scenario, the pessimistic scenario anticipates:
- recession in 2024 and a more modest recovery in 2025 – 2026
- decreased business confidence resulting in reduced investments
- persistent inflation keeping interest rates higher than expected
- reduced real income growth due to slower nominal wage growth, lower labour productivity and higher unemployment rates
- higher mortgage payments stressing consumers' confidence and spending
This scenario reduces households' ability to manage housing payments and weakens housing demand. Decreased labour productivity and business confidence also lower housing starts.
Relative to our baseline scenario, the high-growth scenario anticipates:
- stronger economic growth, especially in 2025 – 2026
- slightly stronger population growth in 2024 – 2026
- greater immigrant integration boosting labour productivity
- increased government spending
- resilient consumption levels driven by substantial increases in real disposable income
In this scenario, housing markets experience increased demand and stronger price pressure due to favourable labour and income market conditions. Additionally, higher population growth and improved labour market outcomes for immigrants add to the demand pressure on rental housing.
2021 to 2023 Summary — Canada
2021 | 2022 | 2023 |
---|---|---|
271,198 | 261,849 | 240,267 |
2021 | 2022 | 2023 | |
---|---|---|---|
MLS® sales | 666,319 | 498,958 | 443,511 |
MLS® average price ($) | 687,251 | 703,959 | 678,282 |
2021 | 2022 | 2023 | |
---|---|---|---|
Real GDP (index, 2020=100) | 105.3 | 109.3 | 110.4 |
Employment (index, 2020=100) | 105.0 | 109.1 | 111.8 |
Mortgage rate (fixed 5-year*) (%) | 3.3 | 4.9 | 6.0 |
Forecast Summary — Canada
2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||||
---|---|---|---|---|---|---|---|---|
Pessimistic | Baseline | High growth | Pessimistic | Baseline | High growth | Pessimistic | Baseline | High growth |
215,989 | 224,485 | 232,267 | 223,875 | 232,276 | 240,463 | 226,211 | 232,084 | 241,659 |
2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | |||||||
---|---|---|---|---|---|---|---|---|---|
Pessimistic | Baseline | High growth | Pessimistic | Baseline | High growth | Pessimistic | Baseline | High growth | |
MLS® sales | 473,622 | 482,244 | 490,481 | 490,756 | 520,146 | 545,972 | 483,555 | 525,991 | 555,341 |
MLS® average price ($) | 703,361 | 711,429 | 721,909 | 755,077 | 779,357 | 802,503 | 776,360 | 814,851 | 838,119 |
2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | |||||||
---|---|---|---|---|---|---|---|---|---|
Pessimistic | Baseline | High growth | Pessimistic | Baseline | High growth | Pessimistic | Baseline | High growth | |
Real GDP (index, 2020=100) | 109.4 | 110.4 | 112.1 | 110.1 | 112.5 | 115.6 | 111.6 | 115.6 | 119.1 |
Employment (index, 2020=100) | 112.4 | 112.6 | 113.5 | 113.7 | 114.4 | 116.4 | 115.0 | 116.0 | 118.0 |
Mortgage rate (fixed 5-year*) (%) | 6.4 | 6.3 | 6.2 | 6.5 | 6.0 | 5.9 | 6.4 | 5.7 | 5.6 |
*Conventional 5-year fixed mortgage rate (average of rates posted by Canadian lending institutions).
The forecasts included in this document are based on information available as of March 21, 2024.
Sources: CREA, CMHC, Statistics Canada, Haver Analytics
Vancouver
Highlights
- Decline in new home construction: We are projecting a slight decline in new home construction for 2024, attributed to restricted financing affecting multi-family building. However, a robust recovery and ongoing near-record growth are anticipated in the following years.
- Resale activity outlook: Resale activity is expected to bounce back in 2024 and continue its upward trajectory until 2026, although it may fall short of peak levels. Supported by sustained immigration and a stable economic environment boosting housing demand, prices are forecasted to rebound and reach new highs by 2026.
- Rental market demand: The persistently high rental demand will drive rents upward and constrain vacancy rates, indicating a challenging landscape for renters.
Anticipate a decline in housing starts for 2024 following a year of record activity
Rental construction has gained traction in recent years, notably expanding its share of multi-unit starts. Despite tight financing conditions expected to impact activity in 2024, demand for rental housing continues to drive growth in purpose-built rental construction.
High land and construction costs, along with financing constraints are making it hard for some multi-family projects to move forward. Favourable financing policies are likely to support rental constructions near the city core, while new condominium developments are projected to focus on areas with lower land costs. These include Coquitlam, Port Coquitlam, Port Moody, Maple Ridge, Surrey, Delta, Langley, within the North and South Fraser regions.
We anticipate these multi-family projects to account for most of the decline in new home constructions in 2024 but are expected to rebound as monetary policies ease in 2025. Construction activity is forecasted to return to previous levels by the end of 2025, driven by the persistent high demand for housing in Vancouver.
The provincial government's announcement of zoning policy changes across British Columbia in 2023 is set to pave the way for higher density development in existing single-detached zones. This will likely lead to an increase in ground-oriented multi-family developments in the upcoming years.
We project construction of single-detached homes will continue to decrease due to limited greenfield space and profitability concerns compared to higher density housing types. While a resurgence is expected in 2025, it is forecasted to remain below the peak levels observed in 2022.
Price declines will reverse as homebuyers’ budgets are expected to expand
Resale activity is expected to pick up in 2024 across Metro Vancouver. The trend of declining prices that began in 2022 is expected to end in 2024. The average resale price will grow in 2025. By 2026, the average resale price in the Lower Mainland will surpass all-time highs last seen in early 2022. This shift in trend follows signs of stronger resale activity at the end of 2023, as prices stabilized and homes saw fewer days on market than the peak at the end of 2022.
Prices in 2024 will be supported mostly by expectations of lower mortgage rates as the Bank of Canada may begin cutting the policy rate by mid-2024, continuing into 2025. Tightening monetary policy over the past couple of years shrank consumers’ budgets and dampened real estate activity across the region. As mortgage rates may change before policy rate decisions, resale activity could quicken earlier than official policy rate changes.
Average incomes rose in 2023, faster than the previous 10-year average, as the economy remained inflationary. We expect incomes to continue growing, but at a slower pace than in recent years. This growth will allow for higher homebuyer budgets and loans.
Price growth in 2024 will not be equal across all housing types. As mortgage rates fall, the most affected buyers will be those seeking lower-priced homes. These homes are further away from the city core, in the North and South Fraser regions. Following lower mortgage rates in 2025 and 2026, single-detached home prices will grow faster.
Higher mortgage rates in the previous 2 years may also have delayed potential first-time homebuyers. As this subset is more likely to buy lower-priced homes, a stabilizing environment may encourage them to resume those plans, further increasing demand for lower-priced apartments and attached homes in the suburbs.
Existing home sales will rebound, driven by demand for lower-priced apartments and townhomes
After a weak 2023, home sales will begin to increase in early 2024, and into 2025. Like prices increases, these sales will be focused first on more affordable units in the suburbs, but increased activity will eventually be reflected in all housing types. Sales will continue to increase into 2026 but will remain well below the highs seen in 2021.
Apartment units will account for an increasing share of resales. Part of this is due to the continued shift in construction activity, with increasing numbers of condominium units being completed each year. More resales will be multi-family units based in the South Fraser region.
Year | City of Vancouver share of sales | Inner suburbs share of sales | South Fraser multi-family share of sales | South Fraser multi-family share of completions |
---|---|---|---|---|
2000 | 24% | 19% | 8% | 10% |
2001 | 24% | 20% | 9% | 9% |
2002 | 25% | 21% | 9% | 8% |
2003 | 27% | 20% | 10% | 9% |
2004 | 27% | 21% | 11% | 9% |
2005 | 25% | 22% | 11% | 11% |
2006 | 24% | 22% | 13% | 11% |
2007 | 25% | 23% | 13% | 12% |
2008 | 24% | 22% | 14% | 14% |
2009 | 25% | 23% | 12% | 16% |
2010 | 25% | 24% | 12% | 18% |
2011 | 24% | 22% | 12% | 21% |
2012 | 23% | 20% | 13% | 22% |
2013 | 24% | 22% | 13% | 23% |
2014 | 24% | 21% | 13% | 22% |
2015 | 22% | 22% | 13% | 21% |
2016 | 20% | 21% | 18% | 19% |
2017 | 20% | 21% | 20% | 19% |
2018 | 21% | 20% | 21% | 19% |
2019 | 21% | 20% | 21% | 19% |
2020 | 19% | 19% | 20% | 19% |
2021 | 20% | 22% | 21% | 20% |
2022 | 22% | 22% | 20% | 22% |
2023 | 21% | 22% | 21% | 23% |
Metro Vancouver’s economy was resilient in 2023, despite contractionary monetary policy. In 2024, it should see marginal growth, before expanding in 2025 and 2026. The unemployment rate in the region rose from recent lows at the end of 2022 but has since moderated to levels seen in 2016. It is expected to stabilize at these higher levels, before coming back down in 2025 and beyond.
Rental demand continues to be high, with more rental supply on the horizon
Rental demand will remain high in 2024, contributing to continued rent growth across all bedroom types. We expect that turnovers will continue to be low, as existing renters have limited alternatives in the rental market.
As mortgage rates decline, some households that transition from renting to homeownership may alleviate some rental demand. However, if immigration to British Columbia (which is absorbed by Vancouver) remains at levels seen in recent quarters, it will continue to put pressure on the rental market, as immigrants are more likely to be renters.
Vacancies will remain low, but the rental universe will see expansion in the next few years. Record levels of purpose-built rental units under construction will drive this growth, as many of these projects are expected to enter the market in the next few years.
The average 2-bedroom rent will continue to rise at similar rates to those seen recently, as new units come to market and turned-over units adjust to market rents.
Changes to international student migration policies will have an impact on renter demand in the region, as international students are most likely to be renters. However, this impact is unlikely to be immediately measurable as these changes won’t decrease this student population right away. Further into 2025 and 2026, these policies may weaken rental demand, but it will still be strong.
Risks to the outlook:
Potential upside factors boosting construction, sales and prices include:
- higher-than-expected immigration inflows
- earlier- or larger-than-expected rate cuts
- new policies meant to encourage development
Conversely, downside risks to the outlook encompass:
- prolonged periods of elevated interest rates
- implementation of policies targeting reduced population inflows or constraints on the resale market
Forecast Summary — Vancouver CMA
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
Single-detached | 3,015 | 3,392 | 2,832 | 2,200 | 2,600 | 2,700 | 3,300 | 2,500 | 3,100 |
Multiples | 22,998 | 22,591 | 30,412 | 23,700 | 29,300 | 24,400 | 35,200 | 22,600 | 37,900 |
Total | 26,013 | 25,983 | 33,244 | 25,900 | 31,900 | 27,100 | 38,500 | 25,100 | 41,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
MLS® sales | 62,817 | 38,852 | 35,590 | 30,300 | 46,200 | 34,600 | 47,600 | 35,500 | 49,500 |
MLS® average price ($) | 1,155,791 | 1,227,910 | 1,216,697 | 1,127,000 | 1,258,000 | 1,163,000 | 1,350,000 | 1,197,000 | 1,446,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | |
---|---|---|---|---|---|---|
Vacancy rate (%) | 1.2 | 0.9 | 0.9 | 0.8 | 0.9 | 1 |
Average rent — 2 bedrooms ($) | 1,824 | 2,002 | 2,181 | 2,380 | 2,580 | 2,800 |
Sources: CMHC, Greater Vancouver REALTORS®, Fraser Valley Real Estate Board
The forecasts included in this document are based on information available as of March 21, 2024.
Edmonton
Highlights
- Strong housing starts: Total housing starts are forecasted to remain robust, propelled by economic fundamentals and a strong demand for lower-priced multi-unit housing developments.
- Resale market growth: Resale market transactions are expected to grow modestly, accompanied by an increase in the average price. Potential homeowners may face challenges due to reduced borrowing capacity and limited inventory of lower-priced units.
- Edmonton rental market outlook: The rental market in Edmonton is projected to stay tight, with rental demand surpassing supply, leading to lower vacancy rates and higher average rents throughout most of the forecast period.
Positive economic conditions will bolster housing market
Economic fundamentals are poised to drive construction and resale activity in the housing market throughout the forecast period. The economy of Alberta presents an overall positive outlook, characterized by favourable labour conditions, stable energy prices and significant investments in the petrochemicals, oil and gas, and power sectors.
This positive outlook is likely to continue in the short term, supported by employment gains across various sectors, including construction, wholesale and retail trade, and professional and technical services.
Moreover, relative housing affordability and lower living costs in Edmonton are anticipated to continue attracting both international and interprovincial migrants, leading to higher population growth. The housing market is projected to remain active over the forecast horizon, supported by strong demand fundamentals.
The historical trend of average housing prices for Edmonton, Toronto and Vancouver show that the price ratios between Edmonton and these larger centres are at their lowest in decades. With comparable average household incomes, this implies that homeownership remains much more attainable in Edmonton than in the other major markets.
Year | Edmonton – Toronto ratio | Edmonton – Vancouver ratio |
---|---|---|
1988 | 38.7% | 51.2% |
1989 | 35.0% | 42.5% |
1990 | 42.8% | 44.6% |
1991 | 49.1% | 48.3% |
1992 | 53.9% | 44.7% |
1993 | 57.1% | 40.0% |
1994 | 56.6% | 37.2% |
1995 | 56.5% | 35.9% |
1996 | 55.5% | 37.8% |
1997 | 53.0% | 38.9% |
1998 | 52.8% | 41.1% |
1999 | 52.1% | 42.3% |
2000 | 51.1% | 42.0% |
2001 | 53.1% | 46.7% |
2002 | 54.4% | 49.8% |
2003 | 56.4% | 50.2% |
2004 | 57.0% | 48.0% |
2005 | 57.7% | 45.3% |
2006 | 71.2% | 49.1% |
2007 | 91.5% | 60.4% |
2008 | 89.1% | 56.9% |
2009 | 82.3% | 55.0% |
2010 | 76.8% | 48.9% |
2011 | 70.8% | 42.2% |
2012 | 68.3% | 46.5% |
2013 | 66.7% | 45.4% |
2014 | 65.0% | 45.2% |
2015 | 60.3% | 41.3% |
2016 | 51.1% | 36.4% |
2017 | 45.5% | 36.2% |
2018 | 47.0% | 35.2% |
2019 | 44.0% | 36.3% |
2020 | 39.3% | 34.1% |
2021 | 35.5% | 32.7% |
2022 | 33.6% | 31.4% |
2023 | 34.2% | 30.2% |
New construction expected to grow, spearheaded by multi-unit housing
Housing starts are expected to remain strong in 2024, comparable to what was observed in 2023. We also expect starts to trend upward in 2025 and 2026, driven by sustained demand for new multi-unit housing and expectations of continued growth. Favourable economic conditions, population inflows and reduced housing inventories will encourage developers to start more multi-unit projects.
Single-detached home construction is forecasted to slow further in 2024, following a decline in 2023 due to reduced demand for this dwelling type. Higher interest rates and stricter financing requirements temporarily discouraged some potential buyers of new single-detached homes, leading to builder inventory accumulation. However, demand growth is anticipated as mortgage rates decrease, and this will likely encourage the development of new single-family homes in 2025 and 2026.
Multi-unit developments, on the other hand, are projected to drive a large share of growth in housing starts. More of these dwelling types were started relative to single-family homes in the past year. Developers responded to the demand for lower-priced units, which increased as households reached the limits of their borrowing capacities. This trend is projected to continue in 2025 and 2026.
Driven by low vacancy rates and renewed investor interest, purpose-built rental and condominium apartment construction will continue to trend upward. Industry sources suggest that investor interest has picked up significantly, especially given the tightening rental market with more condominiums been used for longer-term rentals, as well as the recent implementation of city-wide zoning changes.
In addition, government financing and incentive programs started in the past year are expected to bolster housing starts over the forecast horizon.
However, market conditions will be impacted if energy prices differ significantly from forecasts and inflation persists and therefore delays interest rate cuts. On the other hand, stronger population and income growth could strengthen housing demand and drive more activity on the market.
Strong demand, low inventories of existing homes will drive average price growth
Resale transactions are expected to rebound in 2024, experiencing modest growth fueled by strong demand for more affordable units, like row homes and condominiums. However, sales may be tempered by limited supply. As economic fundamentals improve, and more supply becomes available, further expansion of resale transactions is anticipated in 2025 and 2026.
The MLS® average price is also projected to grow moderately over the forecast horizon. Strong demand and low inventories are expected to put upward pressure on prices. Also, we anticipate that, as interest rates decline, the demand for higher-priced housing units will rebound, resulting in average price growth.
Rental market will remain tight as low vacancy rate drives growth in average rent
Persistent strong demand for rental units and insufficient supply are expected to lead to further declines in vacancy rates in 2024 and 2025. This trend should persist as long as Edmonton’s population continues to grow. However, if construction activity aimed at meeting rental market demand aligns with expectations, vacancy rates could increase only marginally in 2026.
New apartment condominiums intended for long-term rental are not anticipated to play a significant role in expanding supply in the near term. Also, the recently announced cap on student visas by the federal government isn't anticipated to have a material impact on rental demand in Alberta markets over the forecast horizon.
Similarly, the average rent for a 2-bedroom apartment is forecasted to increase from 2024 to 2026 at a pace exceeding the 10-year average. This growth will be driven by low vacancy rates and the addition of new residential apartments with higher rents to the rental universe.
Forecast Summary — Edmonton CMA
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
Single-detached | 5,701 | 6,173 | 5,032 | 4,100 | 7,000 | 4,000 | 7,000 | 4,000 | 8,000 |
Multiples | 6,845 | 8,413 | 8,152 | 8,900 | 10,000 | 9,000 | 11,500 | 9,500 | 11,500 |
Total | 12,546 | 14,586 | 13,184 | 13,000 | 17,000 | 13,000 | 18,500 | 13,500 | 19,500 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
MLS® sales | 29,098 | 27,773 | 25,441 | 25,000 | 30,000 | 24,000 | 31,000 | 23,000 | 32,000 |
MLS® average price ($) | 389,129 | 399,750 | 385,334 | 380,000 | 420,000 | 385,000 | 440,000 | 385,000 | 460,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | |
---|---|---|---|---|---|---|
Vacancy rate (%) | 7.3 | 4.3 | 2.4 | 1.9 | 1.7 | 2.2 |
Average rent — 2 bedrooms ($) | 1,270 | 1,304 | 1,398 | 1,481 | 1,529 | 1,554 |
Sources: CMHC, CREA
The forecasts included in this document are based on information available as of March 21, 2024.
Calgary
Highlights
- Increase in housing starts: Growth in total housing starts is expected, driven by robust demand fundamentals such as population growth and household income levels.
- Continued development of multi-unit homes: Developers are projected to initiate further construction on multi-unit homes due to low vacancy rates and increasing demand for these types of dwellings.
- Resale market activity forecast: The forecast indicates an upward trend in resale market activity with modest price gains, supported by low inventories that are maintaining sellers’ market conditions.
- Tighter rental market conditions: Further tightening of rental market conditions as lower vacancy rates exert upward pressure on average rent throughout the forecast period.
Housing starts will increase as strong fundamentals drive housing market activity
Positive economic and labour market conditions in Alberta, along with stable oil and gas prices, are expected to continue driving demand for housing of all types and tenures over the forecast period. Demand should persist for more relatively affordable unit types, which cater to potential homeowners most impacted by high mortgage rates. The market will remain active, supported by:
- strong population growth, driven by both international and interprovincial migration;
- growth in the population of young adults (18 – 24) and the core working-age population (25 – 44); and
- rising employment and growth in local wages and household income levels.
In 2024, housing starts are projected to reach new highs as builders respond to strong demand and limited inventories. In spite of higher costs and stricter financing conditions in 2023, price and rent increases maintained the profitability of projects for developers and a record number of projects were initiated that year. With low inventories, particularly for multi-unit structures and lower-priced homes, builders will likely continue breaking ground on these types of dwellings in the coming years.
Despite a growing stock of unabsorbed single-detached homes caused by lower demand, a marginal increase in starts of this dwelling type is expected in 2024. Total starts should rise over the forecast period, driven by increased multi-unit construction, including semi-detached, row homes and apartments (both purpose-built rentals and condominiums).
Industry sources suggest that the long-term rental supply shortages will continue to encourage developers to construct more purpose-built rentals for years to come. With building permits issued for residential projects (both commercial and multi-family), construction is expected to increase further once interest rates start to decline.
Federal funding and proposed regulatory changes introduced in the past year are also expected to support housing starts in the census metropolitan area (CMA) further into the forecast period.
However, due to the level of macroeconomic uncertainty, the outlook for Calgary’s housing market may change if inflation persists and interest rate cuts therefore happen later than expected. The outlook could also change if oil and gas prices end up being significantly different from estimates. On the other hand, housing demand could be further strengthened by higher population and income growth.
Limited inventory will keep sales growth moderate and cause prices to rise
We expect MLS® sales to rise throughout the forecast period due to strong demand fundamentals. This rise will, however, be moderated by limited inventory of lower-priced dwelling types. The demand for more affordable units such as row homes and condominium units will drive sales in the short term. But affordability concerns stemming from high mortgage rates might delay resale transactions of higher-priced properties.
According to housing industry sources, sales of existing homes will remain strong as more supply is introduced into the market from downsizing or upsizing homeowners, even if mortgage rates remain elevated.
Similarly, the average MLS® price is forecasted to trend upwards until 2026 as low inventories help maintain sellers’ market conditions. Although new listings are projected to increase in 2024, the increase will be outpaced by sales, and greater competition among buyers will put upward pressure on prices. Despite the substantial number of ongoing housing developments, we expect that it will take some time for new supply to catch up to demand and moderate price growth.
Calgary’s rental market will tighten further as units remain in short supply
Despite a growing rental universe, the vacancy rate for purpose-built rental apartments is forecasted to edge lower in 2024 and 2025. Rental units will remain in short supply as demand continues to be driven by population growth combined with less mobility into homeownership. The recently announced cap on student visas by the federal government isn't anticipated to have a significant impact on rental demand in Alberta markets over the forecast horizon.
Purpose-built rental construction activity has been growing in the past few years: more than half of all apartments started in 2023 were targeted at the rental market. We expect this trend to continue over the forecast horizon.
While the potential addition of new rental supply isn’t projected to offset demand totally, it may moderate further declines in the vacancy rate by 2026. Industry sources suggest that more builders now have a rental division and they are capitalizing on strong rental demand (row homes and laneway homes). Additionally, they have the ability to develop a wider variety of rental options given zoning changes in recent years.
Year | Calgary – Toronto ratio | Calgary – Vancouver ratio | % Change in average rent |
---|---|---|---|
1992 | 79.3% | 77.6% | -0.5% |
1993 | 75.5% | 73.9% | -1.4% |
1994 | 74.6% | 72.0% | 0.0% |
1995 | 72.5% | 70.7% | 0.7% |
1996 | 72.6% | 70.4% | 2.2% |
1997 | 77.3% | 74.5% | 7.4% |
1998 | 80.2% | 81.3% | 13.9% |
1999 | 80.7% | 85.5% | 2.1% |
2000 | 75.6% | 83.1% | 1.1% |
2001 | 76.2% | 85.2% | 6.4% |
2002 | 76.8% | 84.3% | 2.4% |
2003 | 77.3% | 83.3% | 0.0% |
2004 | 76.6% | 81.9% | 0.0% |
2005 | 76.8% | 80.5% | 1.2% |
2006 | 90.0% | 91.9% | 17.9% |
2007 | 102.6% | 100.5% | 15.3% |
2008 | 104.8% | 102.1% | 4.9% |
2009 | 100.3% | 94.0% | -3.7% |
2010 | 95.2% | 89.5% | -2.4% |
2011 | 94.3% | 87.6% | 1.6% |
2012 | 97.2% | 91.2% | 6.0% |
2013 | 100.9% | 95.6% | 7.6% |
2014 | 105.7% | 100.8% | 6.4% |
2015 | 103.4% | 97.4% | 0.4% |
2016 | 94.8% | 86.8% | -7.3% |
2017 | 88.8% | 80.3% | -1.4% |
2018 | 86.7% | 77.1% | 1.7% |
2019 | 83.5% | 74.7% | 1.8% |
2020 | 80.9% | 73.8% | 0.4% |
2021 | 80.7% | 74.3% | 0.0% |
2022 | 82.4% | 73.2% | 6.8% |
2023 | 86.4% | 77.7% | 14.3% |
With persistently low vacancy rates, we expect the average rent for 2-bedroom apartment units to increase further this year and until 2026. Average rent surged by 14.3% in 2023, the fastest pace in over a decade, as the vacancy rate declined to 1.4%.
Rents will continue to face upward pressure as rental demand outpaces supply in the short term. Also, new higher-priced rental apartment units added to the rental universe will contribute to higher average rents.
Forecast Summary — Calgary CMA
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
Single-detached | 5,512 | 5,752 | 5,875 | 5,500 | 7,000 | 5,500 | 8,000 | 6,000 | 8,500 |
Multiples | 9,505 | 11,554 | 13,704 | 13,000 | 15,000 | 13,000 | 17,000 | 12,000 | 18,500 |
Total | 15,017 | 17,306 | 19,579 | 18,500 | 22,000 | 18,500 | 25,000 | 18,000 | 27,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
MLS® sales | 37,103 | 38,393 | 34,549 | 32,000 | 39,000 | 31,000 | 40,000 | 29,000 | 41,000 |
MLS® average price ($) | 501,577 | 531,678 | 551,420 | 570,000 | 620,000 | 560,000 | 670,000 | 550,000 | 700,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | |
---|---|---|---|---|---|---|
Vacancy rate (%) | 5.1 | 2.7 | 1.4 | 1.1 | 1.0 | 1.5 |
Average rent — 2 bedrooms ($) | 1,355 | 1,466 | 1,695 | 1,859 | 1,922 | 1,951 |
Sources: CMHC, CREA
The forecasts included in this document are based on information available as of March 21, 2024.
Toronto
Highlights
- Decline in Housing Starts: We anticipate a decline in total housing starts for 2024 and 2025, primarily driven by high construction and financing costs impacting new apartment developments (condo and purpose-built rental).
- Increase in MLS® Price: In 2024, we project an increase in the average MLS® price due to lower mortgage rates, strong population growth, and expected economic improvements continuing into 2025 and 2026. However, challenges in homeownership affordability are expected to persist.
- Vacancy Rate Projection: There is a projected slight increase in the vacancy rate for purpose-built rental apartments during the 2024 – 2026 period. This rise can be attributed to decreased demand from international students, moderate shifts from renting to homeownership and an increase in supply. The rental market conditions are foreseen to remain tight, leading to upward pressure on rents.
Housing starts will decline through 2025, led by the apartment segment
The outlook for the housing market in the Toronto census metropolitan area suggests a decline in housing starts that will persist through 2025, with a primary impact on the apartment segment, which accounts for most starts in the region.
Anticipated to extend into 2025, this decline is set to predominantly affect the apartment sector, which plays a significant role in new construction activities within the region. Challenges on both the demand and supply sides have led to a pessimistic stance among apartment developers. Factors such as heightened mortgage rates and escalating costs of materials, labor, and financing are expected to result in fewer project initiations during 2024 and 2025. The reduced profitability of condominium and purpose-built rental projects has further dampened the outlook for apartment starts.
The forecast highlights a shift in apartment projects toward suburban municipalities within the CMA, known as "the 905." Developers are capitalizing on lower land costs in these areas to offer more cost-effective housing options, catering to the growing demand for affordable accommodations among prospective buyers and tenants. This regional trend underscores the evolving dynamics of the real estate market, with affordability becoming a key factor influencing development patterns.
The expected slight increase in ground-oriented housing starts
There is an anticipated upturn in the initiation of ground-oriented residences, comprising single-detached, semi-detached and row homes, following a decline in 2023. Projections suggest a modest increase in these housing starts from 2024 to 2026. This growth is supported by a gradual decrease in mortgage rates and a limited supply of existing homes.
Unlike apartment developments, which involve longer planning and construction periods, ground-oriented projects are poised to respond more promptly to reduced mortgage rates.
Among the newly developed ground-oriented dwellings, potential buyers are likely to favor semi-detached and row homes due to their more affordable price points. In contrast, the number of single-detached home starts is expected to remain subdued compared to historical trends, primarily due to affordability challenges that may restrict demand. Municipalities are projected to prioritize denser housing types in alignment with governmental policy objectives.
Resuming growth in the average MLS® price in 2024
Following a decline in 2023, Toronto's average MLS® price is anticipated to rebound in 2024, with continued growth forecasted for 2025 and 2026. This recovery will be supported by decreasing mortgage rates, robust population growth, and an improving economy as we progress into 2025 and 2026. The economic upturn will be further fueled by increased consumer spending, business investments, and ongoing government allocations to local infrastructure projects.
Price changes will vary across market segments. Condominium apartments, prevalent in the City of Toronto and its downtown core, are expected to experience balanced market conditions and subdued price growth. This trend will be the result of increased supply driven by factors such as:
- investors facing challenges with cash-flow-negative rental properties caused by higher mortgage rates since early 2022, leading, in part, to a recent increase in condominium listings; and
- a substantial number of condominium completions.
Conversely, ground-oriented housing types are poised to propel the growth in the average MLS® price. Demand from households seeking more living space, notably millennials with young families, combined with a limited supply of such homes resulting from new construction activities over the years, will maintain tight market conditions within this segment.
Furthermore, MLS® sales, which hit a 23-year low in 2023, are projected to rise from 2024 to 2026. Affordability challenges persist in the region, keeping sales below their recent 10-year average throughout the forecast period. While mortgage rates are expected to decrease gradually, they are likely to remain above levels observed over the last decade, impacting the purchasing power of potential homebuyers.
Quarter | Income required to qualify for a mortgage* | Average household disposable income |
---|---|---|
2018 Q1 | $102,052 | $96,899 |
2018 Q2 | $106,247 | $96,529 |
2018 Q3 | $108,565 | $95,659 |
2018 Q4 | $108,371 | $95,665 |
2019 Q1 | $105,238 | $96,775 |
2019 Q2 | $109,427 | $98,475 |
2019 Q3 | $111,275 | $99,515 |
2019 Q4 | $115,172 | $100,629 |
2020 Q1 | $116,071 | $101,476 |
2020 Q2 | $112,585 | $111,948 |
2020 Q3 | $124,517 | $106,832 |
2020 Q4 | $124,294 | $105,175 |
2021 Q1 | $131,846 | $108,735 |
2021 Q2 | $142,824 | $109,162 |
2021 Q3 | $150,467 | $109,698 |
2021 Q4 | $159,702 | $109,003 |
2022 Q1 | $173,123 | $114,274 |
2022 Q2 | $159,659 | $114,093 |
2022 Q3 | $167,795 | $114,868 |
2022 Q4 | $169,957 | $116,360 |
2023 Q1 | $162,970 | $114,656 |
2023 Q2 | $173,291 | $117,428 |
2023 Q3 | $185,763 | $116,102 |
2023 Q4 | $185,643 | $114,720 |
Rental market will remain tight
The rental market in Toronto is expected to remain tight, with the vacancy rate for purpose-built rental apartments projected to slightly increase over the forecast period from 2024 to 2026. Despite this marginal uptick, the vacancy rate will stay low enough to exert strong upward pressure on rents. Factors contributing to this tight market include high immigration-driven population growth and challenges in homeownership affordability, ensuring continued robust demand for rental properties in the city.
The incremental growth in the vacancy rate can be attributed to several factors. Firstly, there may be a slight decrease in demand from international students due to recent policy changes. Regions near post-secondary institutions and with significant student populations, such as Peel, Etobicoke, Downsview, the Annex, and Scarborough, are more likely to feel the impact of this shift.
Secondly, industry sources report that declining mortgage rates will encourage more renters to transition to homeownership. Some of these potential buyers may opt to relocate outside the Toronto CMA in search of more affordable housing options. The region's high cost of living has already led to a notable migration outflow to other parts of Ontario and Canada in recent years.
Lastly, the high number of purpose-built rental and condominium apartments currently under construction, with a considerable percentage of the region's condominiums being rented out (38.4% in 2023), could contribute to a slightly higher vacancy rate. The surge in purpose-built rental apartment starts in 2023, reaching a historical peak since 1990, is anticipated to result in the completion of these units by 2026.
Potential risks to the outlook
Upside risks to the housing forecasts include higher-than-expected population and income growth, as well as recent or potential policy changes that could lead to more housing starts than initially predicted.
Conversely, downside risks involve a substantial increase in listings if heavily indebted households struggle to manage their mortgages upon renewal. Weak economic growth stemming from persistently high interest rates, coupled with households prioritizing debt repayment over consumption, poses another downside risk to the housing market outlook.
Forecast Summary — Toronto CMA
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
Single-detached | 6,920 | 6,329 | 4,721 | 4,600 | 6,000 | 4,700 | 6,700 | 4,500 | 7,300 |
Multiples | 34,978 | 38,780 | 42,707 | 27,400 | 33,000 | 22,300 | 28,300 | 26,500 | 34,700 |
Total | 41,898 | 45,109 | 47,428 | 32,000 | 39,000 | 27,000 | 35,000 | 31,000 | 42,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
MLS® sales | 122,125 | 75,643 | 66,311 | 71,700 | 88,300 | 72,800 | 101,200 | 69,500 | 109,500 |
MLS® average price ($) | 1,095,869 | 1,190,985 | 1,127,426 | 1,135,000 | 1,205,000 | 1,154,000 | 1,306,000 | 1,160,000 | 1,400,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | |
---|---|---|---|---|---|---|
Vacancy rate (%) | 4.6 | 1.6 | 1.4 | 1.6 | 1.8 | 2.0 |
Average rent — 2 bedrooms ($) | 1,679 | 1,779 | 1,961 | 2,120 | 2,230 | 2,340 |
Sources: CMHC, CREA
The forecasts included in this document are based on information available as of March 21, 2024.
Ottawa
Highlights
- Increase in housing starts: Anticipating an increase in housing starts for 2024, particularly driven by high levels of multi-unit housing starts. Factors such as declining financing costs, easing inflation and policies aimed at reducing development costs will bolster future construction activity.
- Modest house price growth: House prices are projected to increase modestly in 2024, supported by a gradual decrease in mortgage rates that will incentivize more buyers to participate in the market.
- Vacancy rate and rental market: A marginal increase in the vacancy rate is forecasted, attributed to high levels of rental construction offsetting growth in the renter population. Average rents are expected to rise due to sustained high rental demand.
Steady growth driven by thriving tech sector and a growing population
Ottawa is expected to experience steady growth, driven by its thriving technology sector and increased population from both domestic and international migration. Major capital projects undertaken over the next few years will further drive economic development. This growth will lead to higher housing demand, potentially making affordability issues in the region worse.
Housing starts will increase in 2024, led by high levels of multi-unit construction
Multi-unit development is expected to increase moderately in 2024 and remain strong over the forecast horizon as:
- financing costs begin to ease in 2024 and gradually decline in 2025 and 2026
- a strong rental market drives rent increases which will positively impact rental development and attract investors to condominium development
- new policies and programs encouraging the development of multi-unit and rental structures help ease the costs of development
In 2024, we anticipate increased townhome construction due to rising demand for affordable housing. This continues a trend from 2023 when condominium developers shifted focus to townhomes for their cost-effectiveness and faster build times. This trend is likely to continue in 2024 as developers try to meet the demand for more affordable housing options.
We expect a rebound in single-detached starts in 2024, driven by declining mortgage rates that will attract more buyers to the market. Developers are ready to respond to this increased demand by resuming stalled projects and starting new ones.
We anticipate a gradual decrease in financing rates throughout 2024, 2025 and 2026. Lower rates will support high levels of construction activity over the 2025 and 2026 period. We allow for downside risk in our starts forecast range for 2025 and 2026, in case economic conditions don’t improve and interest rates remain high. In this scenario, affordability is likely to decrease.
Prices will increase moderately in 2024, with lower borrowing costs increasing demand
We expect a moderate increase in house prices in 2024, driven by expected declines in mortgage rates that will boost housing demand. The upward pressure on prices is expected to be limited, as new listings are anticipated to climb when market activity increases.
House prices are expected to increase in 2025 and 2026 due to continued declines in borrowing costs and ongoing population growth, resulting in higher demand for housing.
Seasonally adjusted annual sales have increased into the start of 2024, indicating that buyers are becoming more comfortable with the higher interest rate environment. We expect this trend to continue and lead to a moderate increase in sales in 2024. This will continue into 2025 and 2026 as interest rates continue to decline.
Month | Sales | Sales-to-new listings ratio |
---|---|---|
2022 M12 | 13,392 | 49% |
2023 M01 | 12,936 | 51% |
2023 M02 | 12,444 | 60% |
2023 M03 | 12,348 | 60% |
2023 M04 | 14,040 | 68% |
2023 M05 | 15,036 | 68% |
2023 M06 | 15,048 | 66% |
2023 M07 | 14,940 | 62% |
2023 M08 | 13,920 | 54% |
2023 M09 | 13,836 | 49% |
2023 M10 | 12,084 | 46% |
2023 M11 | 12,600 | 47% |
2023 M12 | 14,772 | 58% |
2024 M01 | 14,880 | 55% |
Tight rental market should keep vacancy rates low while driving rents higher
Vacancy rates will remain low in 2024 due to a tight rental market. We expect marginal increases in the vacancy rate over the forecast horizon as rental construction is expected to keep pace with growing demand. Factors contributing to rental housing demand in the region include:
- international migration, which will remain high
- interprovincial migration, as Ottawa has attracted roughly 3,000 residents per year, on average, from elsewhere in Ontario over the past decade
- fewer people moving from Ottawa to Gatineau than the number observed during the pandemic
- unaffordability, as many renters are unable to afford the transition to homeownership
Average rents are expected to climb in 2024 as low vacancy rates lead to increased competition for available units and newly completed rental units are added to the rental supply at higher price points. Additionally, the continuation of low vacancy rates will further contribute to the upward pressure on rents in 2025 and 2026.
Forecast Summary — Ottawa CMA
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
Single-detached | 3,658 | 2,784 | 1,535 | 1,600 | 2,100 | 1,700 | 2,300 | 1,750 | 2,500 |
Multiples | 7,517 | 8,695 | 7,710 | 7,700 | 8,900 | 7,100 | 8,500 | 7,250 | 8,800 |
Total | 11,175 | 11,479 | 9,245 | 9,300 | 11,000 | 8,800 | 10,800 | 9,000 | 11,300 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
MLS® sales | 20,625 | 15,314 | 13,670 | 14,300 | 16,400 | 15,500 | 18,500 | 16,200 | 19,700 |
MLS® average price ($) | 646,139 | 691,736 | 654,795 | 665,000 | 695,000 | 675,000 | 745,000 | 685,000 | 775,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | |
---|---|---|---|---|---|---|
Vacancy rate (%) | 3.4 | 2.1 | 2.1 | 2.3 | 2.5 | 2.7 |
Average rent — 2 bedrooms ($) | 1,550 | 1,625 | 1,698 | 1,780 | 1,860 | 1,935 |
Sources: CMHC, CREA
The forecasts included in this document are based on information available as of March 21, 2024.
Montréal
Highlights
- Stimulated residential investment: Anticipated gradual decrease in interest rates until 2025 expected to stimulate residential investment, leading to a slight upturn in housing starts in Montréal. However, the increase in supply is projected to fall short of meeting growing demand.
- Moderate recovery in property prices: Renewed activity in the resale market forecasted for 2024 to support a moderate recovery in property price growth.
- Rental market pressure: Population growth fueled by high migration and persistent challenges in transitioning to homeownership to keep the rental market under pressure. A decrease in the vacancy rate and further rental price increases anticipated in 2024.
Gradual decline in interest rates will revive the housing market, but affordability will remain an important issue
Inflation and soaring interest rates influenced the residential market in the Montréal census metropolitan area in 2022 and 2023. Housing starts plummeted. The borrowing capacity of households weakened, and property sales declined. Rental demand surged, far exceeding growth in supply. Rent increases reached record levels.
We believe the worst of that storm is probably over. Between now and next year, we expect interest rates to decrease gradually and construction costs to increase more modestly, which should stimulate renewed residential investment in the area.
These conditions will be more favourable to the creation of new housing. Housing starts will be fairly stable this year and are expected to rebound slightly in 2025 and 2026. However, this won't be enough to meet demand, as housing needs are continuing to grow and prices remain high.
Montréal will continue to attract a large proportion of Quebec’s immigrants and non-permanent residents, whose numbers have seen record growth. This demographic trend will continue to be a major source of growth in housing demand for the area, especially in the rental market.
Year | Natural growth | Net interprovincial migration | Net international migration | Net number of non-permanent residents |
---|---|---|---|---|
Average 2010 – 2015 |
26,951 | -10,185 | 43,800 | 3,452 |
2016 | 22,527 | -10,592 | 44,286 | 12,840 |
2017 | 17,796 | -6,000 | 45,746 | 35,932 |
2018 | 15,051 | -6,100 | 45,727 | 43,573 |
2019 | 16,731 | -3,062 | 36,483 | 63,631 |
2020 | 7,180 | -4,603 | 23,443 | -6,045 |
2021 | 15,568 | -4,423 | 45,438 | 9,266 |
2022 | 2,300 | -6,817 | 63,540 | 94,016 |
2022 (Jan. to Sept.) |
3,800 | -4,826 | 48,946 | 68,949 |
2023 (Jan. to Sept.) |
1,700 | -2,871 | 4,0642 | 142,031 |
In addition, the outflow of Montréal residents to other Quebec regions has decreased since the end of the pandemic. Overall, population growth will continue to support housing demand in the Montréal CMA.
The slight drop in mortgage rates will encourage a resurgence in resale market transactions starting this year. The average price should increase gradually, which will continue to limit movement to homeownership.
Similarly, the rental market will remain under pressure, with supply still insufficient to meet demand. Upward pressure on rents will continue, increasing housing affordability challenges.
Housing starts should stabilize in 2024, before starting to rise slowly
In 2023, housing starts in the Montréal area dropped to their lowest level since 2001.
More favourable conditions are now on the horizon, with a gradual decrease in the policy interest rate expected over the coming quarters. In 2024, housing starts should remain fairly stable compared to 2023, putting an end to the drop seen over the past 2 years.
But this upturn will be moderate and gradual. In addition, there's a lag between when new real estate projects are planned and when construction starts. A more substantial upturn in residential construction may not be seen until 2025.
Rental housing starts will continue to drive residential construction. The vacancy rate for purpose-built rental housing is low, while needs are great, and demand will keep growing. Developers remain on the lookout for business opportunities, particularly in certain suburban areas where the cost of land makes it easier to develop new real estate projects. The more financing conditions improve over the short and medium terms, the more the pace of rental construction will pick up again.
The upturn in condominium starts, meanwhile, will be slower. Rising prices and financing costs have weakened demand from both owner-occupiers and investors. Unit pre-sales have slowed sharply. There are few building projects in the planning phase. Condominium starts will decline again this year.
Lastly, starts of single-detached, semi-detached and row houses should remain relatively stable in 2024. Even if demand picks up, available land for low-density building projects remains scarce and expensive, keeping prices high and restricting the pool of potential buyers.
Renewed resale market activity will support moderate price growth
Resale market transactions should pick up this year. The pace of property sales in Greater Montréal began to recover at the start of the year, with the first signs of fixed mortgage rates easing off.
However, sales growth will remain limited by the slight increase in regional unemployment over the past few months and by persistently high prices. In Montréal, the correction that followed the real estate frenzy during the pandemic was relatively limited. After surging by just over 50% from 2019 to 2022, the average Centris® price fell by only 2% in 2023. Qualifying to purchase a home remains a challenge for many households.
Even so, the scarcity of supply on the market is still giving sellers an advantage, and prices should start to rise moderately again this year. As a result, the gradual decrease in mortgage rates will have a fairly modest effect on property affordability for potential buyers.
Rental market will remain under pressure
With the slowdown in apartment starts seen in 2022 – 2023, the number of new units completed this year will be down. Fewer than 13,000 purpose-built rental units could be added to the rental stock in 2024, compared to nearly 16,500 in 2023 (from July of the previous year to June of the current year). But demand for rental housing will continue to rise as the population grows and challenges to homeownership persist.
The rental vacancy rate is expected to decrease again in Greater Montréal. From 1.5% in October 2023, it will fall to close to 1% by October 2024.
These market conditions would encourage another sharp rent increase in 2024. In addition, last year’s steep rise in operating expenses (maintenance costs, municipal taxes, etc.) will once again drive rents up.
Rental market affordability will remain a major challenge in Montréal in the coming years as the scarcity of available units persists, especially in the lower rent ranges.
Forecast Summary — Montréal CMA
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
Single-detached | 2,899 | 1,833 | 1,021 | 990 | 1,290 | 880 | 1,520 | 760 | 1,760 |
Multiples | 29,444 | 22,316 | 14,214 | 11,610 | 17,510 | 13,720 | 19,980 | 14,340 | 25,240 |
Total | 32,343 | 24,149 | 15,235 | 12,600 | 18,800 | 14,600 | 21,500 | 15,100 | 27,000 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | ||||
---|---|---|---|---|---|---|---|---|---|
Low | High | Low | High | Low | High | ||||
Centris® sales | 54,123 | 42,228 | 36,184 | 36,900 | 42,200 | 37,100 | 46,700 | 39,200 | 50,700 |
Centris® average price ($) | 559,030 | 611,947 | 600,501 | 606,200 | 637,900 | 613,200 | 668,300 | 620,000 | 699,900 |
2021 | 2022 | 2023 | 2024 (Forecast) | 2025 (Forecast) | 2026 (Forecast) | |
---|---|---|---|---|---|---|
Vacancy rate (%) | 3.0 | 2.0 | 1.5 | 1.1 | 1.0 | 0.9 |
Average rent — 2 bedrooms ($) | 932 | 1,022 | 1,096 | 1,190 | 1,290 | 1,390 |
Sources: CMHC, Centris®
QPAREB via Centris®. Centris® contains all real estate broker listings in Quebec.
The forecasts included in this document are based on information available as of March 21, 2024.
Our Chief Economist and Deputy Chief Economists
Our Chief Economist and Deputy Chief Economists lead a cross-country team of housing economists, analysts and researchers who strive to improve understanding of trends in the economy, housing markets, and how they impact affordability.
Bob Dugan
Chief EconomistAled ab Iorwerth
Deputy Chief EconomistKevin Hughes
Deputy Chief EconomistTania Bourassa-Ochoa
Deputy Chief Economist
(Music fades in.)
(Visual: Government of Canada logo, and CMHC logo fade in together. A series of images featuring housing construction across Canada.)
(Visual: Two people are shown in conversation. They sit across from one another at a boardroom table. The two individuals are Joelle Hamilton, Communications & Marketing, CMHC, and Bob Dugan, Chief Economist, CMHC.)
00:00:05
JOELLE: Hello, everyone, and welcome. Today we're going to dive into the latest Housing Market Outlook report which forecasts housing activity for Canada and its six major markets. Joelle Hamilton here, and I'm thrilled to welcome Bob Dugan, CMHC's chief economist. Welcome Bob. Thank you for joining us today.
00:00:25
BOB: Absolutely. Yeah.
00:00:26
JOELLE: Today we're going to be diving into an important topic. It's one of our biggest flagship reports and that is the 2024 Housing Market Outlook Report. And I thought it would make sense for us to start with talking about our future — like the future of our economy and also, mortgage rates, as I'm sure that's on everyone's minds. The outlook suggests that there's going to be weak economic growth into 2024 but that there will be a recovery or some improvement in 2025 and 2026. How do you see changing mortgage rates and economic conditions impacting buyer behaviour and a rebound or recovery of our housing market?
00:01:15
BOB: Well, you know, when you think about the economy, one of the key things that you have to understand is what's going to happen to inflation because that's really what drives interest rates and the behaviour by the Bank of Canada. We've seen great progress. You know, inflation in February was down to 2.8 percent year over year, well below what it has been, you know, since the pandemic. And so that's — you know, we're starting to see the light at the end of the tunnel now. So we've had a very — you know, stagnant economic conditions for some time now. We don't expect 2024 to see any kind of strong growth but because inflation is coming down, we do believe that the Bank of Canada's going to be in a position to cut rates in the second half of this year. And that's what sets the stage for stronger growth in the years ahead. So as interest rates come down, we'll see, you know, variable mortgage rates come down in step. Longer-term mortgage rates not as much though because you know, we have something — there's something called a yield curve and it's inverted right now which means that you know, rates on ten-year bonds are actually lower than rates on two-year bonds and that’s a very unusual situation that has to resolve itself. And so that rebalancing of the yield curve is going to keep longer-term interest rates higher. So five-year fixed rates won't come down by as much but we will see some interest rate relief and that sets the stage, of course, for housing recovery. So we do expect to see, you know, stronger existing home sales and stronger price growth, you know, this year and in the years ahead.
00:02:39
JOELLE: So the report also highlights a drop in housing starts this year with a slight recovery in the following two years. What's driving this trend and how will these factors impact overall supply and affordability?
00:02:53
BOB: You know, with the housing starts forecast key to the — to our view is what happens to multiple starts and so, you know, larger, you know, higher density kinds of starts like apartment buildings, those kinds of things. And what happens is the planning horizon for those things is much longer. And so last year one of the key errors in our forecast really was multiple starts or apartment starts stayed much stronger than expected because, for a lot of these larger projects, the planning is done well in advance.
So you know, financing, for example, would have been locked in at lower rates before they started to really increase and so there was, you know, scope for those multiple starts to stay very strong last year. But now when we do our market intelligence we made a lot of calls to developers and different folks to get an idea of the building plans and what it looks like is this year the conditions aren’t going to be quite as good for multi starts and the current economic conditions of high-interest rates is going to be reflected more in the level of activity.
So we expect multi starts to come down. Overall, though, single starts slowly improving and then by next year we'll start to see starts moving higher again. But that being said, well below levels that we saw a couple of years ago.
I think it was 2021 housing starts were around 270,000 units. In 2022 they were around 260,000 units.
Starts are moving lower. This year we're only expecting somewhere in the neighbourhood of 220,000 units. And so very low by recent year standards and not enough to close the supply gap. So, you know, we talk about this three-and-a-half million unit gap in the supply of housing by 2030. If we want to close that gap, we have to double the pace of housing starts from where it is now and if it — but we're not seeing that in our forecast. So in the long term, concerns about affordability if we can't build the supply to meet the demand and we could probably see, you know, house prices and rents increasing if we don't get the homes built.
00:04:48
JOELLE: That's actually a really great segue into my next question. We all know that homeownership is still out of reach for a lot of first-time homebuyers. Canada's population has grown due to immigration and many are choosing rental — to rent. What — like can you explain kind of what's behind like this trend?
00:05:09
BOB: Well, you know, so with immigration it's a long-standing sort of fact that you know, when they first arrive in Canada they tend to rent first and eventually they move into homeownership. So when you have high levels of immigration, you know, last year, the year before, these are folks that are still in the rental market by and large. Not all of them but most of them. And so that adds a lot of demand for rental housing. And then with higher interest rates even though we've seen, you know, house prices move lower in recent years, with higher interest rates the financing costs or the carrying costs of a mortgage are higher than they were a few years ago when, you know, prices were higher but interest rates were much lower. So, you know, access to homeownership is difficult. We also have to — people have to qualify at higher interest rates now that interest rates are higher. So these factors are meaning that a lot of potential homebuyers aren't able to make the move from the rental market into home ownership and because of this they're staying in a rental. That's demand for rental.
With strong growth in immigration that's demand for rental and without supply keeping pace that means that vacancy rates are moving lower and we're seeing rents increase. And we really see this when we look — you know, in the last couple of years, we've introduced a new measure of rent increases where we distinguish between rents in — for units where tenants stay in the apartment because largely those are controlled by rent control in some provinces or you know, by longer-term leases where the rents are predetermined. But when you look at turnover rent, so when a person moves out of a unit and someone else moves in, those new rents really are a reflection of the market, the tension in the market or the lack of supply. And for Canada last year in non-turnover units, rent growth was closer to five percent but when you look at turnover units it was closer to 24 percent. And there are CMAs like Vancouver where in turnover units the growth was actually closer to 33 percent and in Toronto closer to 40 percent. So that just gives you an idea of how the market being in short supply is really driving a deterioration in affordability for people in the rental market.
00:07:11
JOELLE: So I read in the latest outlook that housing prices are set to rise and may even surpass record levels that we saw, I think it was back in 2021 during the pandemic. What's behind that trend?
00:07:27
BOB: I mean it's a repeat of the story I just talked about. It's a supply shortage, right? And so we don't have enough supply of housing in Canada. So as interest rates begin to move down and you know, there's a lot of pent-up demand for homeownership, people that didn't buy in recent years because of high-interest rates that are waiting to sort of jump in, some of these folks will be entering the homeownership market, and when that starts to happen with limited supply that's going to put upward pressure on prices. So it's the deterioration and affordability isn't just a rental story. It's also a homeownership story. So we need more supply of both kinds of housing. And so with strong demand or stronger demand, we're going to see increases in house prices on average in Canada this year just under five percent, but by next year closer to nine, ten percent growth in house prices. And so that's just a reflection of the shortage of supply, the increasing demand and so again a deterioration in affordability likely for people in the homeownership market as well in the years ahead.
00:08:25
JOELLE: I'm hoping you can expand on the two scenarios that are presented in the Housing Market Outlook report. There's the pessimistic scenario and higher growth scenario. Can you explain both of them and their potential impact on Canada's housing landscape?
00:08:42
BOB: Sure. Well, I think it's first important to recognize that forecasting is not an exact science. And so most forecasts, you know, when you look at them in hindsight a year later are wrong. Not that they're completely off but they're usually wrong. So if we say GDP's going to grow by, you know, .3 percent this year, if it's .4 percent, you know, it'll — there'll be some variation around that. And so you have to sort of look at alternate scenarios where you try to anticipate well, what could go better or what could go worse and how does that look for the economy and then how does that look for the housing market just to give people a range of outcomes so they can understand, you know, what our point forecast is but also what kind of range around that there might be to sort of see, you know, what could the housing market look like in a higher growth scenario or a lower growth scenario.
In our low growth scenario, we try to recognize the fact that, you know, inflation has been more persistent than most people had expected. And you know, when you think about interest rates and you look at people's expectations for interest rates, the cut in interest rates keeps being pushed down the road by higher inflation. And so right now our point forecast as rates start to come down in the second half of this year but if inflation is persistent, the Bank of Canada will have to keep the fight up against inflation because they have a target of two percent. They want to get inflation back down there and you know, their credibility rests around their ability to achieve that objective. So they want to make sure inflation moves back down towards two percent. If progress is slower that means interest rates stay higher. That slows the economy but also puts pressure on Canadian homeowners because we have a high level of household debt in Canada and we have a lot of mortgages that have yet to renew at higher rates.
So many homeowners that bought three, four, five years ago still have their low mortgage rates but when their terms are up for renewal they face a higher mortgage rate that'll squeeze their budgets because now all of a sudden their mortgage payments go up because of the higher rates. And so these kinds of things are what we see happening in our downside scenario. Higher rates, households facing a higher interest rate burden on the debt that they hold and that slows the economy. On the upside, one of the things that's helped, you know, the Canadian economy grow in recent years has been the strong level of immigration. And so stronger population growth due to immigration in the forecast period is part of what tells the story of why growth might be higher but also, we assume Canada has a problem with labour productivity and it's very low compared to other G7 countries. We also factor in a bit of an improvement in productivity as immigrants get integrated into the labour force and that improves productivity growth, income growth, and that leads to a higher growth scenario for the economy. In both these situations — in the high-growth scenario what it means is we're going to see stronger growth and demand for both rental and ownership housing. That means more upward pressure on, you know, rents and home prices and possibly a bigger deterioration in affordability offset somewhat by stronger income growth but generally a bigger deterioration in affordability because we don't see starts rebounding enough to make up for the extra demand in this scenario.
In the lower growth scenario, of course, we get a little bit of relief on homeownership demand but maybe more deterioration in the affordability of the rental market because if interest rates stay higher for longer and more people are burdened by their heavy debt levels it's harder for them to get — make that move from rental to homeownership. And so you know, it'll mean maybe more of a deterioration in the rental market affordability and higher interest rates making homeownership less accessible for many Canadians.
00:12:21
JOELLE: So you dove into a little bit of some regional trends but I'm hoping that you can expand on what's happening in Canada's six biggest cities.
00:12:32
BOB: The story is going to be very similar across most of the cities, you know, with some timing differences. And so basically one of the key drivers of what's going to happen in the housing market is the fact that the economy's going to strengthen and interest rates are going to come down. And so in certain parts of the country, they'll see the benefits a little bit sooner. Like we actually expect that housing starts in Montréal will stabilize this year, you know, and housing demand will increase and we'll see more MLS sales and house price increases.
In Vancouver, you know, they're one of the two cities — when I think about Toronto and Vancouver, these are the two cities where we had the biggest error in our multiples forecast last year when I was explaining earlier about how these are longer-term horizons projects. Well, this is where we see some of the weakness in multiple starts this year. So in both Vancouver and Toronto, we expect multiple starts to be lower which will hold back housing starts. But we do expect MLS sales in both of these places to increase and price growth to resume but a little bit not quite as much optimism on the housing starts forecast because of what's going to happen to multis this year being slower, so. But then eventually next year in Toronto, Vancouver, we should see starts begin to improve as well. And so it's just really a bit of a timing difference but you know, most places are going to start to see that recovery in housing markets. It just depends on with housing starts when that actually starts to take hold.
00:13:55
JOELLE: We're down to my last question. Do you have any advice or key takeaways for builders, for policy makers that may be using the information contained in our outlook to make future decisions?
00:14:12
BOB: Well, I'm hoping that this outlook — especially when you look at the housing starts, it really tells a story that housing supply is not going to bridge the gap. We need it to, according to our forecast right now, to restore affordability by 2030. As I said earlier, we would need starts to double the pace that we're forecasting each and every year. And so I think this forecast is a bit of a warning that we have to get serious about — and we are serious about it.
But we have to make sure we get those homes built if we want to see that improvement in affordability because with our baseline forecast and starts sort of in that 220 to 230,000 unit range over the next several years it's not enough to close that gap. And the real risk is we're going to see a further deterioration in affordability for both homeowners and for people in the rental market.
00:15:00
JOELLE: Bob, thank you so much for sitting down with me today and providing us with some really great insights into the 2024 Housing Market Outlook. It's been a pleasure having you in the podcast studio today and I look forward to you coming back soon.
00:15:14
BOB: My pleasure. So long.
00:15:15
JOELLE: And thank you to our viewers today. Stay tuned. In the coming weeks, we'll release our full Housing Market Outlook which will dive into additional markets. And we do want to hear from you. Feel free to leave a comment with your feedback on the report or this discussion. And be sure to subscribe to our YouTube channel for more conversations that matter here on our podcast. Until next time.
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