Canada’s economy will be in the shitter, but at least the cost of shelter will rise, eh. That’s the takeaway in the latest housing forecast from the CMHC, Canada’s national housing agency. The state-owned mortgage insurance firm is calling record existing home prices alongside a weakening economy. They attribute the increase almost exclusively to a rising population, but most of that growth can be seen from their mortgage rate forecast.
CMHC Forecasts Existing Home Prices Will Surge 20% Higher
The CMHC sees home prices rising at a face-ripping rate across the country. They’re currently forecasting the average sale price of an existing home will rise 20.1% (+$136,600) by the end of 2026. It goes from $678,300 in 2023 to a whopping $814,900 in 2026.
Canada’s National Housing Agency Is Forecasting Huge Price Growth Despite Weak Economy
The CREA average sale price for existing homes (actual), compared to the CMHC baseline, pessimistic, and optimistic scenario forecasts.
Source: CREA; CMHC; Better Dwelling.
Hard to believe in the current environment, but most of this growth is forecast next year (isn’t it always?). Existing home prices are seen rising 4.9% (+$33,100) in 2024, before nearly doubling the rate to 9.5% (+$67,900) next year. The third forecast year would then see moderation and the slowest growth, with prices rising 4.6% (+$35,500). The slowest annual growth is still roughly 10% of the average sale price of a home just a decade prior.
Easy to see how this is possible in a great economy, but that isn’t what the agency sees coming for households.
Canadian Economy Expected To Grind To A Halt, Slow Growth Ahead
Despite this home price boom, the CMHC sees economic input moving less ambitiously. Real GDP is forecast to rise 4.7% over the 3 year forecast ending in 2026. Breaking it down, growth is 0% for the current year and implies negative quarters wiping out the current growth we’re seeing. So happy recession! Or is it merry recession, I can never remember.
Modest annual growth is seen in 2025 (+1.9%) and 2026 (+2.8%), even coming in a little ambitious in the final year. However, population growth would still outpace these numbers in the event it performed like historical growth from 2017, excluding the anomalies of 2020 and 2021. This indicates real GDP per capita will continue to fall, implying worsening economic prosperity for the general population.
Canadian Employment Forecast To Lag Population Growth
A worse economy is typically accompanied by slow employment, a point they’re consistent with. The agency expects employment to grow 3.8% over the 3 year span, with 2024 seeing just a third of the growth rate observed last year. Once again, accounting for typical population growth, even slower than the current rate, employment would lag. It’s not typical for home prices to show robust growth during rising unemployment, but moving on.
Cheap Credit Likely The Biggest Driver, Despite Population Claim
What could possibly drive the growth? The CMHC attributes an increase in shelter costs to the continued population boom, seen outpacing new homes. Especially since new home starts are forecast to slow even further, as profitability and building costs get in the way. Taking a peak at their mortgage rate forecast, that’s unlikely.
The agency isn’t forecasting much of a decline for the 5-year fixed rate mortgage. Their outlook has the average rate shedding 0.3 points to 5.7% by 2026. If one forecasts 3% annual wage growth over this period, an average household would see leverage rise roughly 13%, or two-thirds of the forecast price increase. In other words, cheaper credit will almost certainly do most of the heavy lifting in the event their forecast is correct.
What isn’t addressed at all is the current environment not reflecting the population growth narrative. Home prices have barely moved, price growth is stagnant, delinquencies are rising, and most perplexing—rental vacancies are climbing across major regions like Greater Toronto, where the vacancy rate is now twice pre-pandemic levels. It’s easy to argue home purchases were delayed and will come next year (see? Always a year away). However, if the population isn’t buying, they should be renting—but that’s not reflected by the rising vacancy rates. This should bring a lot more attention to the fact Canada is better at tracking its population inflow than outflow.
This is actually great news since they are usually very wrong. Back in 2020 when Covid first hit, the same agency predicted a drop in price of 10%-18%. The exact opposite happened.
Yup, prices rose. It only cost taxpayers hundreds of billion directly, and an inflation crisis.
Can’t wait until they “fix” this downturn.
Six Filipinos in a family qualifying for a mortgage as they all work at full-time jobs will be able to buy a house guaranteed. I see it all over the place and I have met many people from Southeast Asia and heard their stories. A lot of hard-working new Canadians will put their noses to the grindstone, save their dollars and be able to buy a house. I’ve even met some of them working in the oil patch they’ve only been here a couple of years making $150 to 200,000 a year. In Alberta there are plenty of good jobs if you don’t mind getting your hands dirty and sacrificing a few things for a few years. Not that easy in Vancouver or Toronto.
Gee, I wonder why investors are fleeing CAD exposure with the state forecasting fewer jobs and higher prices are coming.
You might be more right than you think. The gov is ramping up borrowing as investors look for better returns and reduced exposure to CAD, which in turn will push borrowing costs higher than they need to be.
Yes you can bet on the exact opposite being more likley, unless they are saying they expect to see a lot more fraud and money laundering that has been the case in the last few years to make up an even bigger difference between what it costs to buy a house and what people can actually afford.. Few to none of the population growth is going to be able to afford to buy a house anytime soon.. so the assumption that population growth through immigration will drive housing prices is not a good one, unless you are assuming that new arrivals are coming here with hockey bags full of cash from indeterminate sources…
It’s hard to see anyone in the govt, or even the banks is not wearing rose coloured glasses on this? The economy is terrible, particularly in the gta. This is primarily because no one can afford to live there with the salaries that are being offered. Even worse, with the exception of existing businesses, no one would open a new business in the gta because you can’t get staff, or even office space – so open your business in Winnipeg, Calgary or edmonton.
The real concern about the ‘story’ coming from chmc or the finance department is that they are 1-3 years behind in their forecasting. At 5.7-6% housing supply is not really an issue, there is tons of supply over 2M in the gta. It’s the prices. So since the liberals, private banks, and the chmc seem convinced that we can afford to pay 80% of our pretax income for a house that cost 30% of its current price 10 years ago?
There is a massive risk of a housing correction in 24/25. The problem is that that would add a major debit line on the feds who have guaranteed 1.3trillion in what are now subprime mortgages. A 35% drop in price would cause a serious recession in Canada. And probably add 500=M to the national debt, just from housing
Population growth will fuel price increases in real estate markets, especially Calgary and Edmonton. Lower mortgage rates will help more people sell out in higher priced markets and allow them to move to lower priced markets, especially Calgary and Edmonton. In 2006 house prices in Calgary were higher than Toronto and just a bit behind Vancouver. History has a habit of repeating itself. Also same thing happened in the early 80’s, Clagary was higher than Toronto. Edmonton is always behind but goes up a lot as well.
Population growth is going to be slashed to 300k residents. It won’t affect prices.
New Canadians aren’t allowed to buy houses until they get their PR, which is being cut as well. The government finally realized they F’d up and need more housing before they allow more immigrants into the country.
You should learn to think out of the box. What happens when Donald Trump gets elected? Migrants and illegals will be too scared to stay in the states and will head to the Canadian border and jump across in record numbers.
Taking on consumer debt to pay rent to a “small investor” slumlord using a bungalow to pack dozens of people inside. Aren’t people fed up with his food prices are rising either?
How many times can you resell a 100 yr old shack?? Lol, the govt just collects taxes and property tax on each transaction thus pumping up prices.
Tiff is eager to drop rates to pump house prices
Tiff needs to get fired as he’s too soft about this situation that he basically made. we need a new BOC Governor.
Real estate markets are regional. No doubt as some people here feel the Toronto Vancouver housing markets will see fairly good size corrections. What you will also see is areas like Calgary Red Deer Lethbridge Edmonton and everything else in between plus Regina and Saskatoon possibly Winnipeg enjoy really active real estate markets this year regardless of those so-called high interest rates rates that I would have killed for when I was a realtor for 20 years back in the seventies and eighties. Anything under 11% was cheap. Multiple offer situations have been taking place in Calgary over the last 2 years and have started taking place in Edmonton and the Red Deer Sylvan Lake Lacombe area where I live. In 2023 55,000 more people came to Edmonton as an example than left. Edmonton has always been the poor sister behind Calgary but it is starting to really move also. The province of Alberta in 2023 had a net population growth of 202,000. That is basically the population of Red Deer and Lethbridge together added to Alberta in 12 months. I saw similar market here in 2006-2007 and prices went up like wildfire in Edmonton and Calgary and Red Deer. Then they went us to stagnation for over 10 years. Properties I bought 2 years ago the one I live in for $249,000 the person bought 12 years ago for $309,000 brand new. A unit similar to mine just sold a month ago for $319,900. Another rental house I bought at Red Deer for $289,000 2 years ago that person 14 years ago paid $314,000 for. Today I can get $360, 000. So anybody reading this and is planning to better their life and they have a family and they want to raise their kids be able to afford a house with a backyard they should really consider looking into the central Alberta area as an example Red Deer is only about an hour and a half from both Edmonton and Calgary. Eventually our lifestyles will be ruined here too with all the influx of people but I’d like to enjoy it while we can.
Fear mongering..
Trying to boost sales it seems
Yeah, no bias there at all. I mean who doesn’t want to live in a country where unemployment is rising and the price of a house costs over 15 times the average income? People will continue to flock to Canada where they can borrow and go bankrupt all within a single year!
Seriously though watch as the next few months inflation bounces up (easily predicted if you look at gas prices) and the BoC starts saying it can’t lower rates. The problem is everyone actually believes what they are saying instead of understanding that the BoC doesn’t care about if you lose your job or your house and the BS that they say out loud isn’t “truth” but rather its intended to manipulate overall market sentiment.