CIBC Report on economic outlook in Canada:

In a recent report by CIBC, economists observed that home prices in Ontario are “still too high to buy, but not high enough to build.” This statement captures the unusual imbalance currently shaping the province’s housing market. Prices remain elevated relative to incomes, limiting affordability for many buyers, yet they are not high enough to generate strong incentives for developers to launch significant new construction projects. Over the coming decade, this dynamic is likely to influence Ontario’s housing sector, broader economy, and patterns of population growth in meaningful ways.

In the short term, Ontario’s housing market is expected to remain subdued. While prices have come down from their pandemic-era peaks, they continue to strain affordability for first-time buyers and even many move-up purchasers. As a result, sales activity may remain relatively slow, and price growth is likely to stay modest or flat over the next few years. Buyers may adopt a cautious approach, waiting for either improved affordability or clearer economic signals before committing. This could lead to a period of stability rather than rapid appreciation.

At the same time, new housing construction may remain weaker than policymakers would prefer. Developers require sufficient profit margins to justify the high costs of land, materials, labour, financing, and development charges. If selling prices do not cover these costs with adequate returns, projects may be delayed or cancelled. A slowdown in construction today, however, risks creating supply shortages in the future. When demand eventually strengthens—driven by population growth and economic recovery—the limited pipeline of new homes could place renewed upward pressure on prices and rents.

The broader Ontario economy is closely tied to housing activity. Residential construction generates employment in trades, manufacturing, transportation, finance, and retail. When homebuilding slows, these related sectors can also experience reduced momentum. In addition, slower or stagnant home price growth can dampen the so-called “wealth effect,” in which rising property values encourage consumer spending. If homeowners feel less financially secure due to flat home equity, discretionary spending may moderate, contributing to slower overall economic growth in the near term. Over the medium term, however, as housing stabilizes and construction gradually recovers, economic growth could strengthen to more sustainable levels.

Population growth will remain a key driver of Ontario’s long-term outlook. Immigration continues to play a central role in Canada’s demographic expansion, and Ontario remains a primary destination for newcomers. Yet housing affordability will influence where people choose to settle. High prices in the Greater Toronto Area may encourage migration toward smaller cities and suburban regions where housing is relatively more affordable. This could lead to a redistribution of population growth across the province rather than a concentration in the largest urban centres.

Meanwhile, rental demand is likely to remain strong throughout this period. If homeownership remains out of reach for many households, more people will stay in or enter the rental market. Unless purpose-built rental construction increases significantly, this sustained demand could keep rents elevated, particularly in major urban centres. Strong rental conditions may encourage more investment in rental housing over time, partially offsetting weaknesses in the ownership market.

Looking ahead over the next five to ten years, Ontario is likely to experience a gradual rebalancing rather than a dramatic correction or a rapid boom. Home price growth may remain modest in the near term before gradually strengthening as supply constraints and population growth reassert upward pressure. Construction activity could remain muted for a few years but improve as market conditions, costs, and policy supports evolve. Economic growth may follow a similar pattern—moderate at first, then gaining momentum as housing and related industries stabilize.

Ultimately, the phrase “too high to buy but not high enough to build” reflects a transitional period in Ontario’s housing cycle. The next decade will likely be characterized by slower, more measured growth, stronger rental demand, shifting migration patterns within the province, and a gradual movement toward a more balanced market. Whether that balance is achieved smoothly will depend on interest rates, government housing policies, development costs, and the continued strength of population growth.