Ontario’s housing market is poised for a modest recovery in 2027 as economic conditions improve, according to a recent report from Desjardins. The forecast anticipates a 5% increase in existing home sales and a 2.4% rise in average prices.
This projected rebound suggests a shift for the sector, yet Launch Len Media notes that the recovery remains fragile and heavily dependent on interest rate stability. Investors and prospective buyers should remain cautious as structural challenges persist.
The 2027 Outlook for Ontario Real Estate
Desjardins senior economist Kari Norman released a report on October 21, 2026, outlining the expectations for the province. The analysis describes the current housing market as weak despite some improvements in buyer choice and rental availability. Source: Desjardins Economic Studies.
The report projects that existing home sales will rise by nearly 5% in 2027 compared to 2026 figures. While this represents growth, the volume of sales is expected to remain significantly below historical norms.
Average home prices are forecast to climb by 2.4% throughout the year. This growth is expected to occur within a balanced market environment, according to the Desjardins data.
However, the broader economic context remains difficult for many participants. The report highlights that the interest rate environment will likely continue to challenge affordability for the average buyer.
The province’s housing sector remains weak despite improved affordability, greater buyer choice and easing rental conditions.
Kari Norman, Desjardins Senior Economist
Supply Constraints and Construction Challenges
Housing starts are projected to reach approximately 65,000 units in 2027. This represents a 6% increase from the previous year, but the figure remains 30% below the levels seen in 2021 and 2022.
The shortfall in new construction is compounded by rising financing costs for developers. As the bank of canada is expected to implement two additional rate hikes in 2027, the cost of borrowing for new projects will likely climb.
These high borrowing costs act as a drag on the industry, limiting the ability of developers to ramp up production. This supply constraint is a primary reason why price growth is expected to remain modest.
The rental market is expected to remain balanced as new condominium and purpose built rental completions come online. This added supply is arriving at a time when population growth is projected to be weak, which helps stabilize rental prices.
Comparative Forecasts and Market Risks
While Desjardins offers a positive outlook, other analysts suggest a more cautious path. TD Economics projects that Canadian home price growth will remain at a sub-2% pace throughout 2027.
The disparity in these forecasts highlights the uncertainty surrounding the market. TD Economics notes that high borrowing costs and loose supply and demand balances will continue to exert downward pressure on prices in Ontario.
Financial stability is another concern for the market. Data from the Canada Mortgage and Housing Corporation shows that mortgage arrears in Ontario reached 0.32% in the second quarter of 2026.
These arrears are expected to rise through the middle of 2027 as households face the cumulative impact of previous rate increases. This trend could lead to increased inventory if distressed properties enter the market.
- Desjardins: 2.4% price growth in 2027.
- TD Economics: Sub-2% price growth forecast.
- CMHC: Mortgage arrears expected to rise through mid-2027.
- Construction: Starts remain 30% below 2021-2022 levels.
- Policy: Two expected rate hikes in 2027.
Analysis of the Fragile Recovery
Launch Len Media maintains that the projected 2027 rebound is highly conditional. The primary driver of this recovery is the assumption that interest rates will stabilize, yet the expectation of further rate hikes suggests this stability is not guaranteed.
A fair counterpoint to the optimistic forecast is that structural issues remain deeply entrenched. High borrowing costs, combined with the slow pace of new housing starts, may continue to suppress market activity regardless of the modest growth projections.
The market is currently caught between a desire for lower prices and the reality of high financing costs. If the Bank of Canada maintains a hawkish stance, the expected 5% increase in sales may fail to materialize.
Ultimately, the 2027 recovery will likely be uneven. Investors should look for specific segments of the market where supply is tightest, as these areas may outperform the broader provincial averages. Source: CMHC.
Steps for Prospective Buyers and Investors
If you are considering entering the market, you should prioritize securing long term financing. Given the expectation of two rate hikes in 2027, locking in a rate now may protect you from future volatility.
Investors should monitor the pace of housing starts in their target municipalities. Areas with significant delays in construction are more likely to see price appreciation due to persistent supply shortages.
Review your debt service ratios to ensure you can withstand potential increases in mortgage payments. The rise in arrears reported by the CMHC serves as a warning that financial buffers are essential in the current environment.
Finally, keep a close watch on regional economic data. While the provincial outlook is modest, local employment trends and population growth will dictate the performance of individual housing markets.
Frequently Asked Questions
Why are housing starts still 30% below 2021 levels?
High financing costs and labor shortages have made it difficult for developers to initiate new projects. The current interest rate environment has significantly increased the cost of construction loans.
Will rental prices decrease in 2027?
Rental prices are expected to remain balanced. While new supply is coming to market, the combination of weak population growth and current demand levels suggests that significant price drops are unlikely.
Should I wait for the 2027 rebound to buy a home?
Waiting for a rebound involves risks, as prices are still projected to grow by 2.4%. You should evaluate your personal financial situation and long term housing needs rather than timing the market based on broad economic forecasts.
Related reading: The structural failure behind Canadian housing costs · Ontario overhauls construction permitting to boost housing supply
