Vacancy rates hit 3.1% while sales stay below historical norms
Canada’s condominium market is emerging as the main drag on new home construction, with Canada Mortgage and Housing Corporation projecting fewer housing starts through 2028 due to weaker demand, higher costs and rising unsold units.
CMHC’s latest Housing Market Outlook places the condominium sector at the center of the slowdown, particularly in Toronto and Vancouver, where inventories remain elevated and new project activity continues to ease. The agency said this dynamic is weighing on overall construction levels even while rental housing remains the primary source of new supply nationally.
Housing demand is expected to remain subdued at the national level. CMHC forecasts home sales will stay below historical averages, while prices are projected to record modest gains after declining in 2025. Rental construction continues to add supply, though CMHC expects this activity to moderate over the forecast period.
The agency’s outlook aligns with broader themes discussed in CMHC’s In-House housing podcast, where chief economist Mathieu Laberge said housing starts showed early momentum in 2025 before slowing later in the year. According to Laberge, Toronto and Vancouver experienced the sharpest pullback, driven in part by a relatively strong supply of condominiums and developer caution tied to economic uncertainty. He noted that condo markets are still absorbing existing inventories heading into 2026.
Regional differences remain pronounced. Construction and home sales in Ontario and British Columbia are projected to remain below their 10-year averages, while activity in the Prairies and Quebec is expected to stay above historical norms. CMHC’s annual outlook covers Canada overall and 18 major housing markets.
“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.”
In Toronto, housing starts are projected to remain low in 2026 as condominium development continues to slow. Strong rental starts are expected to partly offset the decline, though CMHC said higher vacancy rates and slower rent growth will pose challenges for future rental supply. Sales activity is forecast to increase but remain below historical averages.
Vancouver is expected to see housing starts continue trending down, with high construction costs and weakening demand weighing on new projects, particularly condominiums. CMHC expects vacancy rates to remain elevated as rental units started over the past four years are completed and enter the market, placing downward pressure on rent growth and future rental construction.
Rental market conditions are easing nationally, according to CMHC’s 2025 Rental Market Report, discussed in a separate In-House podcast featuring deputy chief economist Tania Bourassa-Ochoa. The national purpose-built rental vacancy rate rose to 3.1%, above the 10-year average, driven by record rental completions and slower demand tied to lower population growth and fewer international students. Bourassa-Ochoa said this has increased competition among landlords, particularly at the higher end of the market, including in Vancouver, where vacancy reached a multi-decade high.
Montreal is projected to maintain a high level of housing starts in 2026 following record growth in 2025, with rental housing continuing to drive construction. CMHC expects a strong increase in new supply to push the rental vacancy rate higher. Calgary is forecast to see new home construction moderate after recent record highs, with vacancy rates rising as more rental units enter the market. Edmonton is expected to experience a moderate decline in housing starts as inventories remain high and population growth slows.
In Ottawa, housing starts are projected to slow after reaching a historically high level in 2025, while the rental market is expected to soften due to lower demand from international students and workers. Halifax is expected to see housing starts trend down from recent highs, though CMHC forecasts the local labor market will support modest increases in home sales and prices.
The 2026 Housing Market Outlook also provides updated forecasts for Victoria, Regina, Saskatoon, Winnipeg, Hamilton, Kitchener–Cambridge–Waterloo, Windsor, St. Catharines–Niagara, London, Gatineau and Québec.
