Canada’s housing market is heading in two very different directions in 2025, depending on the type of home, according to a new report from CIBC.
In their housing outlook for 2025, economists Benjamin Tal and Katherine Judge outline a tale of two markets: low-rise homes are set to bounce back, while the condo market faces a tougher road ahead.
“The low-rise segment will be the first to respond to lower mortgage rates, with still historically low inventories translating increased demand into higher home price inflation,” Tal and Judge note.
In contrast, the high-rise condo market is anticipated to remain under pressure. Oversupply, reduced investor interest and affordability concerns are key challenges. Record-high condo completions are expected to exacerbate an already sluggish market, keeping resale prices under pressure. Tal and Judge explain, “The high-rise segment has been in recessionary territory for the past few quarters and is likely to remain underwater for most of 2025.”
Immigration and population growth shift expectations
Canada’s ambitious immigration targets, recently revised by the federal government, are aimed at curbing housing demand. While policymakers project a rare population decline of 0.2 per cent in 2025 due to reduced visa issuances, Tal and Judge cast doubt on the viability of this goal.
They argue that enforcement challenges and a rise in asylum and humanitarian claims make a population drop unlikely. “We suggest that actual net departures will be close to half the 446,000 assumed currently by the government.,” they write.
Instead, they project population growth of around 1 per cent in 2025, translating to an additional 200,000 housing units needed—mostly in the rental sector.
Rental market stabilizes, but challenges persist
Canada’s rental market may be nearing its peak in price inflation, as rising rents have begun to slow. “There are already early signs of a stabilization in the market due to affordability erosion, with the current growth in asking rates already in negative territory on a year-over-year basis…” This trend is expected to continue in 2025, easing some pressure on renters.
Weak pre-construction in condos could create future supply shortages
Falling mortgage rates are forecasted to boost housing market activity overall, with resale activity expected to rise by 12 per cent in 2025. However, the recovery will be uneven, with low-rise housing outpacing the condo market due to stronger inventory and demand conditions.
“Inventories of low-rise units are tight, reflecting the drop off in homebuilding seen during the Bank of Canada’s tightening cycle, and that’s only now starting to reverse.”
Tal and Judge highlight a looming supply crunch beyond 2025. Weak pre-construction activity in condos could create severe supply shortages by 2026 or 2027, setting the stage for renewed price surges.
“Pent-up demand fueled by falling mortgage rates will entice end-users and investors back to the market. But that newly found demand will be met with a severe lack of supply given that current pre-sale activity (future supply) is at a multi-decade low,” they caution.
Condo market woes concentrated in Ontario and B.C.
Ontario and British Columbia, where investors typically dominate condo purchases, are most exposed to the downturn in the high-rise segment. In Toronto and Vancouver, sales-to-new-listing ratios have fallen into buyer’s market territory as the influx of unsold condos continues to outpace demand.
“The current price gap between new and resale condo prices remains near a record high at roughly 60 per cent, and a full 20 percentage points above its long-run average, the report states. “For condo investment to regain its appeal, we have to wait for resale prices to rise, and interest rates to decline more significantly.”
Looking ahead
As Tal and Judge summarize, the coming years may bring relief for some buyers but also underscore challenges in Canada’s housing supply: “By mid-2026, a lack of supply due to the current drought in the condo pre-sale space and an extremely slow increase in purpose-built activity will clash with increased demand due to lower interest rates and recent changes to mortgage regulations, resulting in higher price pressures.”
