Quebec’s Housing Market Remains Strong, but Momentum Is Fading

In 2025, both the resale market and residential construction continued to expand in Quebec. Despite an uncertain economic environment, the resilience of the province’s housing market once again stood out (table 1). Strong housing starts—largely concentrated in rental construction—and a wide range of measures implemented by the federal, provincial and municipal governments helped support activity despite high construction costs and persistently tight financing conditions. At the same time, an influx of new rental units and shifting demand are gradually rebalancing the market. 

But 2026 could mark the start of a slowdown in Quebec’s housing market. A number of headwinds are expected to weigh on supply and demand across various market segments over the next few years, suggesting that momentum could start to fade.

Although 2025 was marked by economic turmoil and uncertainty, Quebec’s housing sector continued to outpace the rest of the country’s (graph 1). Residential construction remained robust, with housing starts up 22.9% in 2025—close to the 25% surge recorded in 2024 and well above the 5.6% national average. This outperformance reflects the large share of rental units in the Quebec market, as well as the extensive measures introduced by the provincial and municipal governments. 

Even so, residential construction is expected to slow in Quebec over the next few months amid ongoing economic uncertainty. Since the “superpowers” granted to municipal governments to boost housing supply will remain in effect until February 2027, we should continue to see the impacts of the measures that many communities have adopted. We expect the Canada Mortgage and Housing Corporation and the federal government to stay the course as well, with measures like the GST rebate for purpose‑built rental housing and the Apartment Construction Loan Program that boost residential construction in participating municipalities. The new federal housing agency, Build Canada Homes, will also support construction over the next few years by contributing to multiple affordable housing projects. Together, these measures will help partially offset rising construction costs External link.. Meanwhile, the Bank of Canada’s policy rate has settled below the levels seen in 2023 and 2024, reducing borrowing and financing costs for builders and developers.

Yet some headwinds are emerging. In many cities, rapid development has revealed the limitations of existing infrastructure. Municipalities like Gatineau, Lévis and Sherbrooke have had to impose moratoriums in certain neighbourhoods because of these constraints, significantly slowing construction (graph 2). Infrastructure upgrades will be needed in these areas before residential construction can resume.

Another factor holding back residential construction is the sharp increase in vacancy rates in new rental buildings. This segment has been driving the growth in housing starts and is expected to continue to do so this year (graph 3). But vacancy rates in newly built rental units are climbing. This trend could eventually trigger a shift in the types of homes being built. Large rental projects require many years of planning before any shovels hit the ground. The large number of projects already underway will therefore show up in the statistics for this year, even if current market conditions seem less likely to encourage this type of development.

Builders may respond to higher vacancy rates by gradually pivoting away from large rental projects toward homes like plexes and townhouses, which better match first‑time home buyers’ needs. But two constraints are limiting that shift: a shortage of available land and the high cost of construction. Consequently, the composition of housing starts is unlikely to change significantly in the near term. Until the rental projects already in progress are completed, they’ll account for a disproportionately high share of construction activity over the next few years. Builders also expect immigration levels to rebound once current restrictions ease.

The large number of housing starts observed in recent years is now showing up as increased supply. In 2025, more than 38,000 of the 51,389 homes completed were added to rental stock. Since rental units represented a significant share of housing starts in 2024 and 2025, this trend is expected to last for the next few years. But the rents for these new units remain markedly higher than rents for existing housing. 

The expansion of rental stock has also pushed vacancy rates up toward their historical average. Most of the units struggling to find a tenant are new (graph 4), due to their above‑market rent. The increase in both construction costs and interest rates over the past few years is prompting developers to set higher rents to ensure profitability. But demand for these higher‑priced units seems to be fading. Asking rents for vacant units have begun to edge down, an early sign that the market is adjusting (graph 5). Despite this targeted decline, average rent should continue trending upward over the next year, with most of the increase coming from occupied units rather than new ones. The increases recommended by the Tribunal administratif du logement (TAL), which reached a peak of 5.9% last year and remain elevated at 3.1% this year, are contributing to broad‑based rent growth (graph 6).

On top of this, demand is easing due to the drop in the number of non‑permanent residents, especially international students and temporary workers. These individuals typically rent when they first arrive in Canada, since they’re often not sure how long they’ll stay. A decline in their numbers will put downward pressure on rental demand. The reduced presence of international students is already noticeable in neighbourhoods near Montreal’s universities, where vacancy rates are rising. If this persists, the trend could gradually extend across Montreal and then to the rest of the province in the medium term.

Although the current dip in immigration—and its impact on demand—should be temporary, since growth is expected to pick up again starting in 2028, population growth may remain moderate in Quebec over the medium term External link..

Activity in the resale market also remained strong across every region of the province. The average selling price increased everywhere as well, further straining affordability (graph 7). However, sales growth was weakest on the Island of Montreal, indicating that the sharper deterioration of affordability in that city is weighing more heavily on prospective buyers. Montreal seems to be becoming a buyer's market, as Toronto and Vancouver have been for many months. Although harsh weather was partly responsible for the decline in sales seen in January, the recent surge in listings suggests that most markets across the province are gradually rebalancing (graph 8). This may ease price pressures slightly and offer a greater selection to buyers, encouraging more of them to take their first step on the property ladder.

Despite this, demand in the resale market is expected to cool in the coming years, though less than in the rental market. One reason is the uncertainty caused by trade tensions with the United States, which continue to weigh on consumer confidence. Typically, weak confidence reduces intentions to make major purchases, such as a home. Even though fading confidence had less of an impact on buying decisions in 2025 than it has in the past, it remains a risk. It may also prompt businesses to postpone or revisit hiring decisions, putting further pressure on the job market and household finances. 

Our baseline scenario does not see mortgage rates falling over the next year. In fact, it anticipates rate hikes in the second half of 2027 (graph 9). Consequently, the boost in demand driven by rate cuts over the past couple years will likely dissipate. We also need to consider the slowdown in population growth. Non‑permanent residents mostly rent when they first arrive in Canada, but a decrease in their numbers could still affect the resale market by slightly shrinking the pool of potential buyers over the medium term.

At the same time, insufficient supply continues to fuel imbalances in the resale market. Despite the high number of units completed in 2025, most were purpose‑built rentals, limiting the expansion of resale inventory. What’s more, most recently built condos are small units that often don’t meet the needs of prospective buyers. Only 19% of the units completed in 2025 were single‑family homes, plexes, townhouses or semi‑detached homes (graph 10).

This shortage of single‑family homes, combined with high construction costs that drive up new home prices, is putting sustained pressure on the resale market. As a result, prices are expected to keep rising over the next few years (graph 11). Under these circumstances, a meaningful improvement in affordability seems unlikely in the short to medium term.

Quebec’s housing market remains resilient, but activity is expected to soften this year. Residential construction remains robust, especially for rental housing, but we’re starting to see signs of a slowdown due to the increasingly uncertain economic climate, higher vacancies and weaker demand for more expensive units. An influx of new units is rebalancing the rental market, as can be seen in rising vacancy rates and lower asking rents.

Lively activity in the resale market shows demand is still buoyant. However, it may ease as confidence remains fragile, mortgage rates stabilize and supply stays tight. In particular, the limited inventory of single‑family homes will maintain upward pressure on prices.

All things considered, the market is gradually rebalancing, but affordability is unlikely to improve significantly in the short term, and the structural pressures in Quebec’s housing market will persist.