‘Notable’ rise of housing construction in the region, CMHC predicts

“Sluggish activity” in 2024 is how the Canadian Mortgage and Housing Corporation described construction on new homes in the region.

According to its outlook for 2025, this should change and instead increase in Kitchener, Cambridge and Waterloo. The rise is believed to be driven by multi-unit construction, as the report notes there are more rentals expected to be built this year.

CMHC said this is a shift from condominiums that were encouraged by developers to bring more supply to the area. As a result, condo sales are weak in the cities, with declining activity and more unsold listings. Investors are seeing stagnant prices and note negative cash flow, which will lead to fewer units built in this housing type, the report reads.

“A lot of the rebound in starts will be in the rental apartment space and then we do expect some pick-up in the homeownership starts, like single-detached and townhomes as well,” Anthony Passarelli, CMHC Lead Economist, southern Ontario, said.

The report lists a few reasons for why the region could see home sales increase this year.

One of those is the expanding technology sector in the area, a main source of housing demand and employment. Remote work for the last several years has reshaped buyer’s preferences, as many want cities that support work-from-home lifestyles.

Passarelli said another reason for a predicted rise in home sales is the belief more people from the Greater Toronto Area (GTA) will be looking to Waterloo Region.

“That typically occurs when prices start to grow in their own region. So, we are seeing some evidence that prices and activity is rising in the GTA and that usually means you’ll get more of those buyers looking in Kitchener, Cambridge, Waterloo for those types of houses.”

Prices on an average home are set to see an increase in 2025, but this could tighten the market leading to increased competition and higher costs.

Last year’s average home prices in the area are forecasted to be around $788,750, a decrease from the year prior when the average price was around $791,691.

Prices are expected to rebound this year and land between $790,000 to $850,000.

The demand for single-detached homes are a key driver of this price growth, the report notes, whereas condos will be less due to decreasing investor interest.

More rental units coming online this year and fewer international students in the area could result in the vacancy rate increasing. The average rent for a two-bedroom apartment will increase at a slower pace due to operating costs and strong demand.

Pressures on homeownership affordability also contribute to the steady increase in rents.

Last year’s average rent for a two-bedroom unit, according to CMHC, landed at $1,766. This is expected to increase to $1,881 in 2025.