Is Canadian home construction about to ramp up at last?

Canada recorded stronger housing construction in July, but industry experts say the country still faces significant challenges in meeting demand and restoring affordability.

Canada Mortgage and Housing Corporation (CMHC) reported Monday that housing starts increased 4% in July compared to June, reaching a seasonally adjusted annual rate of 294,085 units. This represents the fastest pace of construction since September 2022.

“Through the first seven months of the year, actual housing starts have remained above 2024 levels, primarily driven by increased multi-unit starts in the Prairie Provinces and Québec,” said Tania Bourassa-Ochoa, CMHC’s deputy chief economist.

The corporation’s data shows 23,464 actual housing starts in centres with populations of 10,000 or greater, marking a 4% increase from July 2024. Year-to-date totals reached 137,875 units, also up 4% from the same period last year.

Regional variations emerge

The construction activity varied significantly across major metropolitan areas. Montreal led with a 212% year-over-year increase in housing starts, driven by multi-unit projects. Vancouver recorded a 24% monthly increase, also supported by multi-unit construction.

Toronto, however, experienced a sharp decline, with housing starts falling 69% compared to July 2024. Both multi-unit and single-detached projects contributed to the decrease in Canada’s largest city, the report noted.

Prince Edward Island demonstrated notable per-capita performance, building at roughly double the national rate with about 121 starts per 100,000 people, compared to the national average of 56.

Supply gap persists, builder confidence remains low

Despite the July gains, Canada remains far from meeting housing demand. CMHC estimates the country needs 430,000 to 480,000 new homes annually to restore pre-pandemic affordability levels.

Restoring home affordability was a centrepiece of Mark Carney’s April general election campaign and his government is pushing ahead with the Build Canada Homes (BCH) initiative. That measure aims to accelerate construction on federal lands, support non-market housing providers, and promote new methods of building such as prefabricated and 3D-printed homes.

But Bourassa-Ochoa highlighted to CTV News that economic uncertainty and higher construction costs may slow future activity. “We’ve been in a context where the economy has been quite uncertain. We’ve been facing geopolitical uncertainty as well,” she said.

And builders sentiment across the country remains low, according to the Canadian Home Builders’ Association. Its latest housing market index for the second quarter showed a reading of just 24.9 for single-family construction confidence – out of a possible 100 – with multi-family mired at 22.8.

CMP

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