CMHC’s Chief Economist Discusses Vacancy Rates, Policy Changes, and Market Trends

CMHC’s Chief Economist Discusses Vacancy Rates, Policy Changes, and Market Trends
DATE
January 24, 2025
READING TIME
time

The Canadian real estate market in 2025 is a study in contrasts. On one hand, cities like Toronto and Vancouver are seeing glimmers of relief as rental vacancies inch upward. On the other, markets like Calgary and Edmonton are tightening further, fueled by interprovincial migration and economic momentum. For real estate professionals, this isn’t just a market—it’s a chessboard. Success hinges on understanding the nuances of supply, demand, and policy shifts, all while guiding clients through a landscape where data is king, but timing is queen.

To unpack this, let’s dive into insights from CMHC’s Chief Economist, Mathieu Laberge (affectionately called “Matt” by industry), who sat down with the Canadian Real Estate Investor Podcast to dissect trends, debunk myths, and spotlight opportunities.

The Rental Rebalance

For years, Canada’s rental market has been a pressure cooker, with vacancy rates hovering near historic lows. But 2024 brought a seismic shift: a 4% surge in purpose-built rental construction—the largest increase in decades—pushed the national vacancy rate to 2.2%, edging closer to the 10-year average of 2.7%. “Supply is finally outpacing demand,” notes Laberge. “But let’s be clear: this isn’t a freefall. Rents are still rising—just at a slower pace.”

Toronto, long the poster child for unaffordability, is leading this rebalance. A wave of new condo completions has flooded the market, giving renters options beyond basement suites and aging high-rises. Vacancies here jumped to 3.1%, the highest since 2020. But don’t mistake this for a buyer’s market. “Toronto’s ‘discount’ is relative,” Laberge cautions. “A one-bedroom still averages $2,400—it’s just not climbing 10% annually anymore.”

Meanwhile, Calgary is rewriting the rules. Vacancies tightened to 1.4% as Alberta’s job boom lures transplants from Ontario and BC. Rents here spiked 12% year-over-year, with two-bedroom units now averaging $1,900—a steal compared to Toronto, but a shock to locals. “Calgary’s challenge is catching up to demand,” says Laberge. “Investors are racing to convert single-family homes into suites, but zoning delays and construction bottlenecks are holding back supply.”

Then there’s Montreal, Canada’s perpetual wildcard. As a traditional rental-heavy market, its 1.8% vacancy rate masks a deeper truth: nearly 40% of units are over 50 years old. “The city needs modern inventory,” Laberge stresses. “Young professionals want amenities—think co-working spaces, smart home tech—not creaky staircases.”

The Agent Angle

  • Toronto: Pitch condo investors on “value-add” plays—units with dated finishes ripe for upgrades. A $20,000 kitchen renovation could push rents from $2,200 to $2,600.
  • Calgary: Target suburban single-family homes with walkout basements. With permits fast-tracked for secondary suites, these can yield $1,500+/month in additional income.
  • Montreal: Partner with developers of new mid-rise rentals near transit hubs. Highlight energy efficiency (a major sell for eco-conscious Gen Z renters).

Housing Starts

Canada notched 240,000 housing starts in 2024—a 2% year-over-year increase and the third-highest tally on record. Yet Laberge is quick to temper optimism: “We need 400,000 starts annually to close the supply gap. We’re barely halfway.”

The regional breakdown reveals why. Quebec and Alberta are thriving, with starts up 15% and 12%, respectively. In Montreal, a mix of government incentives and streamlined permitting has ignited a mid-rise construction boom. Calgary, meanwhile, is leveraging its sprawling geography, with developers snapping up greenfield lots for starter homes.

But in Ontario and BC, the story is starkly different. Starts in Toronto dipped 5%, while Vancouver saw a 3% decline. “It’s not a demand issue—it’s a cost issue,” Laberge explains. “Construction loans at 8% interest, soaring material costs, and two-year permit delays are killing projects.” A recent CMHC study found that 40% of proposed Toronto condo towers have stalled pre-construction, with developers struggling to hit presale thresholds.

The bright spot? Purpose-built rentals. With condo sales sluggish, builders are pivoting to rentals, buoyed by federal tax incentives and CMHC financing programs. “These projects are safer bets for institutional investors,” says Laberge. “They’re not as glamorous as condos, but the cash flow is steady.”

The Agent Angle

  • Pre-Construction Opportunities: In Alberta and Quebec, promote presale condos with 10%+ projected appreciation. Use CMHC’s starts data to identify high-growth corridors.
  • Ontario/BC: Focus on assignment sales. Many condo buyers from 2021–2022 are desperate to offload contracts before closing. Negotiate discounts of 15–20% for cash-ready clients.

How Governments Are (Finally) Stepping Up

From zoning reforms to tax breaks, policymakers are scrambling to unclog the housing pipeline. Laberge highlights three game-changers:

  1. BC’s “As-of-Right” Zoning: Legalizing fourplexes province-wide has sparked a flurry of tear-downs in Vancouver’s Kerrisdale and Oakridge neighborhoods. “A $2M bungalow can become a $4M quadplex,” says Laberge. “But builders need agents to source off-market deals—homeowners don’t always know their lot’s potential.”
  2. Toronto’s Development Charge Waivers: To spur basement suites and laneway homes, the city axed DC fees for secondary units. “A $50K savings per suite makes these projects viable,” Laberge notes. “Agents should comb through older neighborhoods like Leslieville or Bloor West Village for lots with existing laneways.”
  3. The Federal Housing Accelerator Fund: This $4B program rewards cities for slashing red tape. London, Ontario, used its $74M grant to digitize permitting, cutting approval times from 24 months to 6. “Agents in accelerator cities should prep clients for a wave of new inventory—and competition,” advises Laberge.

The Agent Angle

  • Host zoning reform workshops for homeowners. Show them how their property’s value could double with a triplex or fourplex.
  • Partner with architects and contractors. Offer bundled “pre-development” services (e.g., feasibility studies, permit applications) to investors.

Where to Play in 2025

  • Investors: Calgary’s rental boom and Montreal’s mid-rise gap are prime targets. For higher risk tolerance, consider stalled Toronto condo projects—they’ll rebound when rates drop.
  • First-Time Buyers: Push modular homes in Quebec or Alberta. These turnkey properties often come with 10-year warranties and price tags 20% below traditional builds.
  • Downsizers: Luxury rentals are exploding in Vancouver and Toronto. Highlight concierge buildings with amenities like meal kits and yoga studios.

As Laberge puts it: “The market isn’t just about bricks and mortar anymore. It’s about vision—seeing what a property could be, not just what it is.” For agents, that means becoming part analyst, part psychologist, and part futurist.

The 2025 market won’t be easy, but for those willing to dig into data, embrace policy shifts, and think creatively, it’s a goldmine. After all, in a country where everyone needs a home, the real estate agent who can navigate complexity will never be out of work.

Source: The Canadian Real Estate Investor

Disclaimer:
The content of this article is for informational purposes only and should not be considered as financial, legal, or professional advice. Coldwell Banker Horizon Realty makes no representations as to the accuracy, completeness, or suitability of the information provided. Readers are encouraged to consult with qualified professionals regarding their specific real estate, financial, and legal circumstances. The views expressed in this article may not necessarily reflect the views of Coldwell Banker Horizon Realty or its agents. Real estate market conditions and government policies may change, and readers should verify the latest updates with appropriate professionals.

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CMHC’s Chief Economist Discusses Vacancy Rates, Policy Changes, and Market Trends

The Canadian real estate market in 2025 is a study in contrasts. On one hand, cities like Toronto and Vancouver are seeing glimmers of relief as rental vacancies inch upward. On the other, markets like Calgary and Edmonton are tightening further, fueled by interprovincial migration and economic momentum. For real estate professionals, this isn’t just a market—it’s a chessboard. Success hinges on understanding the nuances of supply, demand, and policy shifts, all while guiding clients through a landscape where data is king, but timing is queen.

To unpack this, let’s dive into insights from CMHC’s Chief Economist, Mathieu Laberge (affectionately called “Matt” by industry), who sat down with the Canadian Real Estate Investor Podcast to dissect trends, debunk myths, and spotlight opportunities.

The Rental Rebalance

For years, Canada’s rental market has been a pressure cooker, with vacancy rates hovering near historic lows. But 2024 brought a seismic shift: a 4% surge in purpose-built rental construction—the largest increase in decades—pushed the national vacancy rate to 2.2%, edging closer to the 10-year average of 2.7%. “Supply is finally outpacing demand,” notes Laberge. “But let’s be clear: this isn’t a freefall. Rents are still rising—just at a slower pace.”

Toronto, long the poster child for unaffordability, is leading this rebalance. A wave of new condo completions has flooded the market, giving renters options beyond basement suites and aging high-rises. Vacancies here jumped to 3.1%, the highest since 2020. But don’t mistake this for a buyer’s market. “Toronto’s ‘discount’ is relative,” Laberge cautions. “A one-bedroom still averages $2,400—it’s just not climbing 10% annually anymore.”

Meanwhile, Calgary is rewriting the rules. Vacancies tightened to 1.4% as Alberta’s job boom lures transplants from Ontario and BC. Rents here spiked 12% year-over-year, with two-bedroom units now averaging $1,900—a steal compared to Toronto, but a shock to locals. “Calgary’s challenge is catching up to demand,” says Laberge. “Investors are racing to convert single-family homes into suites, but zoning delays and construction bottlenecks are holding back supply.”

Then there’s Montreal, Canada’s perpetual wildcard. As a traditional rental-heavy market, its 1.8% vacancy rate masks a deeper truth: nearly 40% of units are over 50 years old. “The city needs modern inventory,” Laberge stresses. “Young professionals want amenities—think co-working spaces, smart home tech—not creaky staircases.”

The Agent Angle

  • Toronto: Pitch condo investors on “value-add” plays—units with dated finishes ripe for upgrades. A $20,000 kitchen renovation could push rents from $2,200 to $2,600.
  • Calgary: Target suburban single-family homes with walkout basements. With permits fast-tracked for secondary suites, these can yield $1,500+/month in additional income.
  • Montreal: Partner with developers of new mid-rise rentals near transit hubs. Highlight energy efficiency (a major sell for eco-conscious Gen Z renters).

Housing Starts

Canada notched 240,000 housing starts in 2024—a 2% year-over-year increase and the third-highest tally on record. Yet Laberge is quick to temper optimism: “We need 400,000 starts annually to close the supply gap. We’re barely halfway.”

The regional breakdown reveals why. Quebec and Alberta are thriving, with starts up 15% and 12%, respectively. In Montreal, a mix of government incentives and streamlined permitting has ignited a mid-rise construction boom. Calgary, meanwhile, is leveraging its sprawling geography, with developers snapping up greenfield lots for starter homes.

But in Ontario and BC, the story is starkly different. Starts in Toronto dipped 5%, while Vancouver saw a 3% decline. “It’s not a demand issue—it’s a cost issue,” Laberge explains. “Construction loans at 8% interest, soaring material costs, and two-year permit delays are killing projects.” A recent CMHC study found that 40% of proposed Toronto condo towers have stalled pre-construction, with developers struggling to hit presale thresholds.

The bright spot? Purpose-built rentals. With condo sales sluggish, builders are pivoting to rentals, buoyed by federal tax incentives and CMHC financing programs. “These projects are safer bets for institutional investors,” says Laberge. “They’re not as glamorous as condos, but the cash flow is steady.”

The Agent Angle

  • Pre-Construction Opportunities: In Alberta and Quebec, promote presale condos with 10%+ projected appreciation. Use CMHC’s starts data to identify high-growth corridors.
  • Ontario/BC: Focus on assignment sales. Many condo buyers from 2021–2022 are desperate to offload contracts before closing. Negotiate discounts of 15–20% for cash-ready clients.

How Governments Are (Finally) Stepping Up

From zoning reforms to tax breaks, policymakers are scrambling to unclog the housing pipeline. Laberge highlights three game-changers:

  1. BC’s “As-of-Right” Zoning: Legalizing fourplexes province-wide has sparked a flurry of tear-downs in Vancouver’s Kerrisdale and Oakridge neighborhoods. “A $2M bungalow can become a $4M quadplex,” says Laberge. “But builders need agents to source off-market deals—homeowners don’t always know their lot’s potential.”
  2. Toronto’s Development Charge Waivers: To spur basement suites and laneway homes, the city axed DC fees for secondary units. “A $50K savings per suite makes these projects viable,” Laberge notes. “Agents should comb through older neighborhoods like Leslieville or Bloor West Village for lots with existing laneways.”
  3. The Federal Housing Accelerator Fund: This $4B program rewards cities for slashing red tape. London, Ontario, used its $74M grant to digitize permitting, cutting approval times from 24 months to 6. “Agents in accelerator cities should prep clients for a wave of new inventory—and competition,” advises Laberge.

The Agent Angle

  • Host zoning reform workshops for homeowners. Show them how their property’s value could double with a triplex or fourplex.
  • Partner with architects and contractors. Offer bundled “pre-development” services (e.g., feasibility studies, permit applications) to investors.

Where to Play in 2025

  • Investors: Calgary’s rental boom and Montreal’s mid-rise gap are prime targets. For higher risk tolerance, consider stalled Toronto condo projects—they’ll rebound when rates drop.
  • First-Time Buyers: Push modular homes in Quebec or Alberta. These turnkey properties often come with 10-year warranties and price tags 20% below traditional builds.
  • Downsizers: Luxury rentals are exploding in Vancouver and Toronto. Highlight concierge buildings with amenities like meal kits and yoga studios.

As Laberge puts it: “The market isn’t just about bricks and mortar anymore. It’s about vision—seeing what a property could be, not just what it is.” For agents, that means becoming part analyst, part psychologist, and part futurist.

The 2025 market won’t be easy, but for those willing to dig into data, embrace policy shifts, and think creatively, it’s a goldmine. After all, in a country where everyone needs a home, the real estate agent who can navigate complexity will never be out of work.

Source: The Canadian Real Estate Investor