Elevated rental starts masked a softer outlook
Canadian housing construction ended 2025 on a high, but the underlying signals point to a more fragile pipeline that mortgage professionals could not ignore.
While December housing starts surged to an annualized 282,439 units – an 11% jump from November – the six‑month trend barely moved at about 264,400 units, underscoring how much of the strength came late in the year.
Rental surge masked regional fault lines
TD economist Rishi Sondhi said the strong headline number “left starts highly elevated when compared to historical trends and likely reflects momentum in purpose-built rental construction.”
He added that December’s gain “was also concentrated in Ontario, where construction costs are elevated and pre-sales activity continues to be weak, meaning last month’s gain is likely unsustainable.”
The month’s increase was driven by multi-family projects, with urban starts up 14% to 231,000 units, while single-detached activity stayed flat at 39,100 units.
Ontario led with nearly 93,900 units, followed by Quebec at 62,700 and British Columbia at 46,400. The Prairies slipped to about 50,100 units as weakness in Manitoba and Alberta offset Saskatchewan, and Atlantic Canada dropped to 17,000 units.
A rental‑heavy pipeline means ongoing investor and developer focus on income properties, while fewer single‑detached starts suggest limited relief for end‑user buyers facing high rates and tight resale supply.
Strong year, but still short of supply goals
Canada Mortgage and Housing Corporation (CMHC) data showed housing starts rose 5.6% in 2025 compared with 2024, with actual December starts in larger centres up 25% year over year to 20,716 units – the strongest December on record, driven largely by Ontario.
Yet CMHC’s chief economist, Mathieu Laberge, previously warned that the country remains “far from the target” required to restore affordability, with 430,000 to 480,000 units needed annually through 2035.
What comes next for mortgage market participants
Sondhi said that, looking ahead, housing starts are likely to moderate amid “sharply slower population growth, rising vacancy rates across several regions, climbing unsold inventories, and weak pre-construction sales activity in the GTA market,” even as federal efforts such as the Building Canada Homes initiative could provide some support.
Since August last year, the housing starts remain highly elevated on a trend basis, lifted by rental construction, even as monthly figures swung lower. Actual housing starts ticked up only modestly in 2024, prompting questions about whether builders could keep pace with demographic pressures and policy targets.
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