Macro Outlook: How Canada’s Housing Forecast & Affordability Crisis Shape Long-Term Strategy
Canada’s Housing Forecast: A Brief Overview
The Canada Mortgage and Housing Corporation (CMHC) recently released its updated housing forecast, projecting a modest 2% home price decline in 2025. This outlook reflects the ongoing challenges of affordability, high interest rates, and broader economic uncertainty. However, the CMHC expects a gradual recovery beginning in 2026, setting the stage for a more stable market in the years ahead.
For buyers, sellers, and investors, this forecast highlights two realities: short-term headwinds and long-term opportunity. While price dips may dominate the headlines, experienced investors understand that Canadian real estate remains a resilient wealth-building asset class.
Affordability Crisis: The Persistent Challenge
Despite the potential for price softening in 2025, affordability will remain a major barrier for households across Canada, particularly in Toronto and Vancouver. Years of rapid price growth, coupled with rising interest rates since 2022, have stretched household budgets to the limit.
Key affordability pressures include:
High mortgage qualification thresholds: Stress tests and elevated borrowing costs reduce buyer purchasing power.
Limited supply of housing: Even with new completions on the horizon, demand continues to outpace availability in many urban centres.
Stagnant wage growth vs. housing inflation: Income gains are not keeping pace with shelter costs.
CMHC suggests affordability will not meaningfully improve for several years—even with the temporary decline in prices. For investors, this dynamic shifts the conversation away from short-term speculation and towards long-term strategy and rental market positioning.
The Investor’s Lens: Why Long-Term Still Wins
When assessing the macro outlook, investors must remember one principle: real estate is a long-term play. A 2% dip in 2025 may capture attention, but it pales in comparison to decades of compounded growth. For instance, major Canadian markets like Calgary and Toronto have delivered 5%+ compound annual growth rates (CAGR) over the past two decades.
What matters most for investors today is aligning strategies with structural market forces:
Rental Demand Remains Strong
With ownership out of reach for many households, rental demand in cities like Toronto is surging. Investors holding quality rental properties are well-positioned to capture consistent cash flow and long-term appreciation once prices rebound.Population Growth Supports Demand
Immigration targets remain historically high, with hundreds of thousands of newcomers arriving annually. This demographic tailwind ensures that housing demand will continue to grow faster than supply, particularly in the Greater Toronto Area (GTA).Short-Term Headwinds, Long-Term Opportunity
While interest rates and affordability challenges may soften prices temporarily, these conditions also create entry points for strategic investors. Buying during a dip often proves profitable over a 5- to 10-year horizon.
Toronto: Ground Zero for Affordability
Nowhere is the affordability crisis more evident than in Toronto. Benchmark prices remain above $1 million, and even with a 5% decline from last year, the average household struggles to buy. As a result, Toronto has become a prime rental city, creating opportunities for investors to meet demand while benefiting from long-term appreciation.
The key for Toronto investors is to:
Prioritize pre-construction and condo assignments: These offer lower entry prices with strong long-term upside.
Target rental-friendly neighborhoods: Areas with transit access, employment hubs, and universities remain resilient.
Think generationally, not quarterly: Success in Toronto real estate comes from riding cycles, not timing them.
Building a Long-Term Strategy Amid Crisis
To navigate the next 24 months and beyond, investors should adopt a macro-informed strategy:
Diversify geographically: Toronto remains a powerhouse, but markets like Calgary offer affordability and strong rental yields.
Leverage professional management: With rising tenant demand, property management ensures consistent cash flow and reduced stress.
Stay liquid for opportunities: A softer 2025 market may present discounted buying opportunities for those prepared.
At Wealth Builders, we emphasize that every purchase is an investment, whether you are a first-time buyer, an upsizing family, or a seasoned investor. By looking past short-term volatility and focusing on long-term fundamentals, you can turn today’s affordability crisis into tomorrow’s wealth-building opportunity.
Final Thoughts
CMHC’s forecast of a 2% decline in 2025, followed by recovery in 2026, underscores that Canada’s housing market is resilient, but affordability challenges will persist—especially in Toronto. For investors, this means staying the course, leveraging strong rental markets, and embracing the long-term wealth-building mindset.
Opportunities exist even in challenging conditions. The key is to think strategically, align with demographic and economic trends, and remember that in Canadian real estate, time in the market beats timing the market.