New home construction rose sharply, although the uptick was led by rental builds in Toronto and Montreal
Canada’s new home construction rebounded in September, with housing starts rising 14% from the previous month—a pace that surprised many economists and signaled ongoing resilience in the face of challenging market conditions.
Canada Mortgage and Housing Corporation (CMHC) reported a seasonally adjusted annualized rate (SAAR) of 279,234 units, up from a revised 244,543 in August.
Economists had expected a more modest increase to 255,000 units.
Still, a caveat: growth in major centres Toronto and Montreal was fuelled by higher rental apartment construction.
“The six-month trend in housing starts was pushed higher in September, driven by significantly higher monthly starts in Ontario, Quebec and the Prairie provinces,” said Tania Bourassa-Ochoa, CMHC’s deputy chief economist.
“Notably, Montreal and Toronto were responsible for more than a quarter of the total monthly starts nationally, primarily due to increased rental apartments starts. While these results indicate some resilience, it is worth noting that current housing starts levels are generally reflective of decisions made months or even years ago when investor confidence was higher than it is today,” Bourassa-Ochoa said.
Rental surge drives urban growth
Rental construction led the way, with multi-unit starts in Montreal and Toronto surging 135% and 112% year-over-year, respectively.
Vancouver, by contrast, saw a 1% decrease in starts for the month.
The annual pace of housing starts in cities with populations over 10,000 rose 16% to 254,345 units, while rural starts were estimated at 24,889.
The surge in new construction comes as policymakers and industry leaders grapple with affordability challenges and a persistent housing supply gap. CMHC’s data underscores the importance of rental supply in Canada’s largest cities, reflecting shifting investor priorities and demographic trends.
Industry voices warn of deeper crisis
Adding to the mounting pressures facing Canada’s housing and mortgage sectors, a new round of United States tariffs on Canadian softwood lumber and finished wood products took effect Tuesday.
For Canadian mortgage professionals, higher material costs could translate into elevated home prices and renovation expenses, potentially slowing new construction and dampening demand.
Canada’s homebuilding crisis may already be even worse than it seems, Canadian Home Builders’ Association (CHBA) chief executive officer Kevin Lee told Canadian Mortgage Professional, with housing starts essentially skewed by construction of purpose-built rental accommodation.
The government, according to Toronto mortgage agent Kalson Jang, “needs to make it easier and less costly for developers to build homes.
“And I’m also sure there’s a lot of red tape and [more] that builders have to go through to build. If it’s going to be that costly, it’s tough for a builder to start a project now when the market’s slower because with all those costs, they might not feel like the odds of making a profit are high enough to make them want to build.”
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