Unaffordable housing prices will continue to put upward pressure on rent prices, according to a new report.

The Canada Mortgage and Housing Corporation (CMHC) released its latest housing market outlook on Thursday.

It predicts weaker economic growth will push home prices down year-over-year, but not back to pre-pandemic levels.

“Price decreases are largely the result of the negative impacts of higher mortgage rates as well as slower income and job growth,” said the report.

While overall home prices are decreasing, CMHC said they still remain elevated in some markets.

In addition, new housing starts are expected to decline in 2023 and remain well below levels seen in recent years.

The combination of high prices, increased mortgage rates and a limited supply of new housing means homeowners will be “even less affordable in 2023,” said the report.

CMHC said affordability challenges in the homeownership market continue to drive up demand for rental units, pushing up rents and making them more unaffordable.

“Economic recovery and immigration will add to the demand for housing in 2024 and 2025 and the lack of affordable options and new supply will continue to create challenges,” said the report. “This calls for creative solutions from across the industry to boost affordable rental housing supply.”

But there is some good news on the horizon, according to CMHC. Prices and sales are expected to rise again over the next couple of years and mortgage rates are anticipated to become more affordable after 2023.

“These changes, along with renewed growth in income and employment will support housing demand and supply,” said the report.