CMHC: Homebuilders will face headwinds through 2028

Key Takeaways:

• CMHC projects a prolonged slowdown in homebuilding through 2028 as elevated construction costs, weak demand, rising unsold inventory and economic uncertainty keep housing starts and sales below historical averages.
• Ontario and British Columbia, particularly Toronto and Vancouver, are expected to underperform, while Quebec and the Prairies including Montreal and Calgary are forecast to remain comparatively stronger.
• Strong rental construction has boosted supply, but rising vacancy rates and slowing rent growth are expected to dampen future rental development across major cities.

The Whole Story:

Canada’s homebuilders will face persistent headwinds from elevated construction costs, weakening demand and rising unsold inventory through 2028, according to the Canada Mortgage and Housing Corporation’s latest Housing Market Outlook released Wednesday.

New home construction is projected to decline nationally, with sales expected to remain below historical averages and prices showing only modest gains after falling in 2025. The outlook reflects broader economic caution driven by geopolitical and trade uncertainty, as well as slower population growth.

“We expect Canada’s economy to grow slowly in 2026, as many households and businesses remain cautious because of geopolitical and trade uncertainty. This caution is leading many households to delay buying homes and making builders more hesitant to start new projects,” said Kevin Hughes, CMHC Deputy Chief Economist. “These pressures will affect housing markets differently across the country. Stronger local conditions may help support housing market activity in Montreal and Calgary for example, while weaker conditions could further slow housing demand and construction in Toronto and Vancouver.”

Regional variations will be pronounced. Construction and home sales in Ontario and B.C. are forecast to remain weaker than their 10-year averages, while the Prairies and Quebec are expected to stay above historical norms. Elevated rental construction will continue to drive new supply but will moderate over the forecast period.

In Toronto, new housing starts are projected to remain low in 2026 as condominium starts continue to slow, though strong rental starts will partly offset the decline. Higher vacancy rates and lower rent growth will challenge future rental supply. Sales activity is expected to increase but remain below historical averages.

Vancouver housing starts are expected to continue declining as high construction costs and weakening demand weigh on new project activity, particularly for condominiums. As rental units started over the past four years are completed, the vacancy rate will remain elevated, putting downward pressure on rent growth and future rental construction.

Montreal is forecast to maintain high housing starts following record growth in 2025, with rental housing continuing to drive residential construction. A strong increase in new unit supply will push the rental vacancy rate up.

Calgary’s new home construction is predicted to moderate after rapid expansion, with housing starts expected to decline from recent record highs. As new rental units enter the market, vacancy rates will rise, slowing rent growth.

The CMHC outlook also covers Edmonton, Ottawa, Halifax and 11 other major census metropolitan areas.