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The Canada Mortgage and Housing Corporation is predicting a return to record-high home prices next year and potentially record-breaking prices in 2026, according to its latest report.

The CMCH released its 2024 Housing Market Outlook report on Thursday, which forecasted that homes will soon cost prices akin to levels seen in early 2022 and could even reach new highs by 2026.

The housing agency believes this is due to the supply not keeping up with the demand, resulting in the continuation of higher rents and lower vacancy rates. 

“Unfavourable financing conditions are expected to make it more difficult for homebuilders to start new rental projects in 2024,” said CMHC chief economist Bob Dugan in a statement.

“We anticipate by 2025-2026 lower interest rates, continued government support, and policies encouraging greater density in urban centres should make more projects viable.”

According to the CMHC’s report, Canada’s explosive population growth in recent years will likely sustain concerns regarding affordability in the homeownership market for at least the next three years.  

Canada has seen the highest population growth since the 1950s, leading to higher costs for home buyers.

Home sales decreased in early 2021 from their peak by almost one-third and remained there through the end of 2023. 

“During this time, the pool of potential homebuyers grew through robust population growth, increased savings and higher incomes,” reads the report. “As mortgage rates and economic uncertainty decrease in the second half of 2024, we expect buyers to start returning to the market.”

The report also noted that buyer resurgence is in part due to a shift in demand towards lower-priced homes in markets wherever they are offered throughout Canada.

The CMCH is forecasting that the market will surpass the 10-year average between 2025 and 2026 but ultimately remain below the 2020-21 levels as a consequence of high pricing.

The report also predicts housing starts to decline in 2024 before increasing again next year and through 2026 due to Canada’s interest rates remaining stagnantly high, which has impeded builders’ desire for new construction.  

“Interest rate increases led rapidly to declining starts of smaller structures, particularly single-detached starts,” reads the report.

“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.”

The CMHC predicts that Ontario and B.C. will see the biggest decline in housing starts nationally.

“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,” reads the report. 

However, the Prairies are expected to perform well due to having more affordable home prices and an overall stronger economic outlook soon. 

This is also partly due to the region having fewer restrictions on skilled workers, which will aid in the volume of new home construction.  

Atlantic Canada is expected to feel less pressure on new home construction than it has over the past several years from unusually high migration rates in 2022 and 2023. 

The report predicts that housing starts in those provinces will remain robust through the year.  

Quebec is expected to see an increase in housing starts in 2024-25 when compared to 2023 which saw the province hit a sharp decline, but overall building will remain below Quebec’s post-pandemic levels.