Brian Matthey

Canada’s housing starts made meaningful gains in 2025. Record rental construction and more missing middle housing added important new supply, building on the momentum highlighted in the Fall 2025 Housing Supply Report.

At the same time, ownership-oriented construction weakened overall. Short-term imbalances continued in several markets. Rising unsold inventories suggest today’s supply may not align well with buyers’ needs, while tighter financing conditions and project cancellations threaten future supply.

This report focuses on both sides of that story: where Canada is succeeding in expanding housing options and where further progress is needed to ensure long-term supply and affordability.

Highlights

• Canada’s housing starts rose 6% in 2025, driven by record rental and expanding missing middle construction. Building timelines improved. High completion levels added important supply, especially in Vancouver, Calgary and Edmonton.
• Major vulnerabilities lie underneath this progress. Condominium presales collapsed, unsold inventory surged and financial conditions tightened. These pressures threaten the future pipeline of ownership-oriented housing supply, particularly in Toronto and Vancouver.
• Slower population growth, cautious buyers and elevated construction costs shaped supply decisions, pushing developers towards smaller apartments while limiting family-sized, ground-oriented homes.
• Looking ahead, near‑term supply imbalances are expected to ease as new supply is absorbed, helping affordability in the long run.

CANADA HOUSING MARKET: STILL WAITING FOR A NATIONAL HOUSING MARKET RECOVERY

National housing sales and the MLS Home Price Index continued to decline in March, reflecting continued weakness in market conditions.

The number of national housing sales posted its fifth consecutive monthly decline last month, edging down by -0.1% (sa figures) from its February level, while it declined by -2.3% (nsa) since March 2025. From February to March, sales declined in 17 of the 31 local markets we track. National new listings also edged down by -0.2% (sa) between February and March and posted a -4.9% (nsa) decline since March 2025.

With almost identical monthly declines (in %) in both sales and new listings, the national sales-to-new listings ratio stayed constant at 47.8% (sa) from February to March, still in the lower half of the estimated balanced conditions range. This indicator of market conditions has hovered in this lower-half range since December 2024, and also frequently since Spring of 2022. From February to March and according to this indicator, market conditions eased in 14 of the local markets we monitor and tightened in 17 of them. It also suggests 14 of these local markets were balanced in March and the same number were favouring buyers, all in B.C. and Ontario. Only 3 markets—Regina, Saskatoon and St. John’s (NL)—were assessed as sellers’ favourable.

The other indicator of market conditions we report—months of inventory—stayed unchanged at 5.0 from February to March, very close to its long-term pre-pandemic average of 5.2, hence also suggesting balanced conditions. But despite being essentially balanced at national level, this indicator continues to mask significant divergences across provinces with British Columbia and Ontario showing figures above their long-term average and the other provinces showing below average figures.

The national MLS House Price Index (HPI) declined -0.4% (sa) from February to March, continuing its downward trend that started in the second half of 2023. As in many previous months, all unit types contributed to both the monthly and 12-month declines in the national MLS HPI. Over the 12-month period ending in March of this year, this price index declined -4.7% (nsa). Its trend profile reflects the weakening market conditions mainly coming initially from the lagged effects from the rise in interest rates until Fall of 2023, and subsequently from slower population growth and the rise in global trade and geopolitical tensions since early 2025.

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The evolving conflict in the Middle East is causing heightened volatility and US trade policy continues to reshape global trade patterns. Both are ongoing sources of uncertainty. The Bank’s April outlook assumes tariffs remain unchanged and the global benchmark price of oil declines to US$75 per barrel by mid 2027.

The Iran war has led to sharply higher energy prices and transportation disruptions, diminishing growth prospects in oil-importing countries and boosting inflation worldwide. In the United States, growth is still expected to be solid over the projection horizon, boosted by AI-related investment and consumption growth. China’s economy is being supported by robust exports. In the euro area, higher prices for oil and natural gas will weigh on economic activity.

Financial conditions have been volatile, reflecting daily developments in the Middle East and shifting market expectations for inflation and interest rates. Bond yields are modestly higher since January while equity markets, which weakened sharply at the outset of the war, have recovered. Since the start of the war, the US dollar has appreciated against most major currencies. The Canada-US exchange rate has been relatively stable.

Overall, the global economy is expected to grow by about 3% in 2026, 2027 and 2028. Projections for inflation over the next year are revised up because of the jump in energy prices.