Canada’s Housing Market: A Deceptively Stable Landscape with Growing Imbalances
At first glance, Canada’s housing starts appear stable, but beneath this veneer of equilibrium lies a complex and evolving market landscape characterized by stark regional disparities. Recent data from the Canada Mortgage and Housing Corporation (CMHC) illuminates these trends, revealing both the strengths and weaknesses that define the current state of housing in the country.
Current Housing Starts: A Snapshot
The seasonally adjusted annual rate of housing starts remained flat at 279,510 units in May, a slight decline of just 0.2 percent from April. Year-to-date figures show a modest increase, tracking 1 percent ahead of last year. At this surface level, everything might seem secure; however, delving deeper uncovers significant regional imbalances impacting the market dynamics.
A Two-Speed Market: Regional Disparities Emerging
Canada’s housing market is increasingly revealing a two-speed trajectory. Growth is robust in the Prairies and Quebec, driven by strong demand for single-detached homes and purpose-built rental units. Notably, Saskatchewan and Manitoba have witnessed extraordinary year-to-date gains of 206 percent and 209 percent, respectively. Alberta follows with a commendable 39 percent increase. The trend in these regions emphasizes a demand for larger, more livable units, reducing vulnerability to speculative bidding and aligning more closely with genuine resident needs.
In stark contrast, Ontario and British Columbia are experiencing a downturn in housing starts, with declines of 29 percent and 22 percent, respectively. This sharp downturn is largely attributed to the stagnation in condominium activity in these populous provinces.
The Collapse of Condominium Demand
The aspirations for increased housing supply in Canada did not account for the dramatic collapse in condominium demand. Major cities like Toronto and Vancouver have faced unprecedented slowdowns, with total condominium sales—including resale, new, and pre-construction—plummeting 75 percent in Toronto and 37 percent in Vancouver since 2022. This downturn is reflective of a market that has overbuilt units targeted at investors, rather than meeting the housing needs of families and individuals.
The ramifications of this can be seen in Toronto, where the pre-construction inventory has ballooned to an astonishing 58 months of supply—over 14 times the levels observed in 2022. This over-saturation of the market poses a significant challenge as investor interest wanes and the need for family-oriented housing becomes clearer.
A Shift Toward Renting
As the housing landscape continues to evolve, many Canadians are increasingly turning to the rental market. With national rents dipping 3.3 percent in May—marking the eighth consecutive month of declines—there’s a shift away from homeownership amid broader economic uncertainties. The current economic climate, characterized by rising unemployment rates, which reached 7 percent in May—the highest since 2016 (excluding COVID-19)—has left job seekers in a prolonged hunt for work.
Further complicating matters are trade tensions, new tariffs, and an overall climate of policy uncertainty, which have contributed to diminished business confidence. Elevated mortgage rates, coupled with slower population growth and increasing job losses, have left both potential homebuyers and investors reticent.
Early Signs of Resale Stabilization
Despite the prevailing challenges, there are nascent indicators of stabilization in the resale housing market. National home sales saw a modest increase of 3.6 percent in May—marking the first uptick in six months. While this indicates a potential leveling off in price declines, year-over-year prices still remain 3.5 percent lower, and sales are down by 4.3 percent from last year. Caution continues to loom over both buyers and sellers, influencing decision-making within the housing landscape.
The Developer’s Dilemma
For developers, the landscape remains uncertain. High-cost urban markets have seen a slowdown in pre-sales, compounded by more restrictive financing conditions and an increase in project cancellations. Even as certain provinces maintain robust building activities, Canada’s overall housing forecast is sensitive to broader economic pressures anticipated to persist well into the second half of 2025.
Conclusion: A Complex Future Ahead
The dynamics of Canada’s housing market reflect a nuanced and multi-layered reality. While regions like the Prairies and Quebec are thriving, Ontario and British Columbia face steep challenges in adapting to shifting demands, particularly in the condominium sector. With economic uncertainties complicating the landscape further, the future of housing in Canada remains a critical area to watch as developers, investors, and residents navigate through these unpredictable waters.
For ongoing insights and analysis, consider exploring RSM Canada’s latest report, The Real Economy Canada, and stay updated on these evolving trends.
