Canada’s housing market is expected to stay “subdued” this year amid economic uncertainty stemming from the trade war and U.S. tariffs — with a recession still a possibility.
The Canada Mortgage and Housing Corporation released its 2026 housing market outlook Tuesday, which says demand from buyers is expected to “remain below historical averages.”
“Elevated price‑to‑income ratios, high carrying costs and lingering job uncertainty will keep many buyers on the sidelines,” the CMHC said in the report.
“Higher vacancy rates and slower rent increases are expected nationwide, giving renters more time and flexibility to save before buying a home.”
U.S. tariffs imposed on Canada by President Donald Trump’s administration have dented the Canadian economy and job market, especially in aluminum and steel, lumber, autos and automotive parts manufacturing.
This means purchasing a home may not be a priority for many Canadians right now, given the cloud of uncertainty hanging over the job market.
The CMHC says there will likely be more market activity on a national scale next year and into 2028.
“While overall home demand is subdued, national home sales are projected to pick up temporarily in 2026, led by Ontario and British Columbia. These two provinces had some of the weakest sales in decades, so their rebound is mostly due to pent-up demand from recent weakness, not a sustained recovery,” the CMHC said.
“National home sales are then anticipated to rise slightly in 2027 and 2028 as the economy improves. Higher incomes and steadier job markets will boost confidence and make people more willing to buy.”
Prime Minister Mark Carney announced a framework of capital spending measures from the federal government that are aimed at spurring economic activity to not only counteract the negative impacts of the trade war and tariffs, but also make Canada more resilient to trade disruptions for the long term.
The CMHC says these ambitions by Ottawa will likely strengthen the economy, but it will take some time.
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“While businesses and households scale back, government spending will remain strong. The federal government has embarked on an ambitious program, investing heavily in infrastructure, housing, clean energy, defence and productivity-enhancing projects,” the CMHC said.
“These initiatives aim to boost productivity and attract private investment over time. Large-scale projects take years to ramp up, so the benefits may be gradual.”
The report also says housing starts will decline from now until 2028 because developers are facing high construction and labour costs, and when combined with weak demand in the housing market, their priorities will shift from building condominiums to more purpose-built rental units.
Housing starts are the number of new residential projects that began construction in a given period of time, and can include any home from a government-subsidized rental unit to a large detached house.
In larger markets like Toronto and Vancouver, where overall housing starts reports have been mostly represented by new condo construction, those numbers are expected to reverse.
The CMHC says developers are focused on completing current condo construction projects rather than starting new ones.
The report says that in an “alternative scenario,” where the economy would potentially be in a worse situation than it is now, there is a higher risk of a recession this year.
“If business sentiment worsens and government projects are delayed, Canada could slip into a mild recession in 2026 due to a sharp drop in investment,” the CMHC said.
“In this alternative scenario, the economy would not return to baseline levels until after 2028. Similarly, weaker housing demand would pull prices, sales and starts below the baseline forecast.”
The CMHC says that in order to avoid this housing recession scenario, geopolitical and trade tensions would need to ease, the government would need to speed up its economic ambitions and the population would also need to grow beyond expectations to add more demand to the marketplace.
“In such a scenario, housing prices, sales and starts could also surpass expectations,” the CMHC said.
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