TD flags a sharp regional split as rentals propped up near-record construction
Canadian homebuilding runs at a pace rarely seen outside the pandemic boom, but TD Economics said much of that strength rests on a narrow base and masks a deep regional divide.
In a new report, TD economist Rishi Sondhi said housing starts are trending at about 264,000 annualized units, “a rate that’s only been topped a few times during the entire post-war period.”
“On an historical basis, Canadian homebuilding is indeed running strong,” he said, noting that starts never exceeded 273,000 units over a full calendar year.
Rental boom masks uneven supply picture
Sondhi stressed that once population growth is factored in, “the rate of housing starts looks much more pedestrian.”
TD estimated a remaining gap of roughly 400,000 units between demographically driven demand and new supply, while cautioning that the shortfall is concentrated in ground-oriented homes rather than condos.
“The current, hot pace of homebuilding is being disproportionately driven by purpose-built rental units,” supported by tax breaks and federal financing tools such as the Apartment Construction Loan Initiative and MLI Select, Sondhi said. “While construction of these units has helped cool rent growth, building of other, ownership-based units has lagged.”
Regionally, TD found starts are at or above long-run norms in every market but Ontario, with Alberta and Atlantic Canada “particularly elevated” and Quebec and British Columbia buoyed by rental and condo projects respectively.
Ontario’s condo engine stalls
Ontario, and especially the Greater Toronto Area, stands out as the clear weak spot.
Condo starts in the GTA are “trending near their lowest level since the Global Financial Crisis,” hit by falling prices, investor retreat and sharply higher construction costs, TD said.
GTA new home sales in 2025 fell to their lowest level in 45 years of records, with just 5,314 units sold compared with roughly 28,000 a year on average over the past decade, Altus Group reported.
A separate analysis highlighted more than 25,000 unsold pre-construction condo units across the GTA as of the second quarter of 2024, underscoring how the traditional investor-driven pre-sale model seized up.
Policy promises face questions
TD expects starts to decline in most regions over the next two years as population growth slows, vacancies rise and unsold inventories climb, particularly in Ontario and British Columbia.
Still, Sondhi said “tremendously weak population growth should ensure that the gap between demographically-driven demand for new homes and new housing completions closes in 2027,” while warning that even then, construction would likely need to be “amped up even further, on a sustained basis,” to restore pre-pandemic affordability.
Federal moves such as the planned GST break for first-time buyers on new homes under $1 million and the new Build Canada Homes agency are expected to offer some support.
TD cited Parliamentary Budget Officer estimates that Build Canada Homes could generate about 26,000 units over five years, roughly a 2% boost to completions at current trends.
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