Canadian Home Sales Slip, Housing Starts Rebound in September

Toronto | 18-Oct-2025, 10:30 EST — Canada’s housing market showed two very different signals in September. According to fresh data from the Canadian Real Estate Association (CREA) and the Canada Mortgage and Housing Corporation (CMHC), home sales declined 1.7% month-over-month while housing starts surged nearly 14%, pointing to uneven momentum across the housing sector.

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Sales Slow After Summer Gains

CREA reported that national home sales dropped 1.7% in September compared to August. The decline marks the first pullback after several months of steady improvement through the summer. Analysts say the dip reflects persistent affordability pressures: while borrowing costs have come down slightly from their 2023 highs, they remain well above historical norms.

In many metropolitan markets, particularly Toronto and Vancouver, buyers remain cautious. Rising utility costs, household debt levels, and economic uncertainty have also tempered demand.

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Builders Push Forward

In sharp contrast, the supply side of the housing market gained momentum. CMHC data showed housing starts jumped to a seasonally adjusted annualized rate of 279,234 units in September, up from revised August figures of about 245,000 units. That represents a double-digit rebound and underscores strong builder activity.

Much of the increase was concentrated in multi-unit urban projects, reflecting federal and provincial pushes to expand affordable housing and rental supply. While single-detached starts were steady, the strength in apartments and condos drove the overall surge.

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Why the Divergence?

Economists point to a mix of short-term and structural factors:

• Financing Conditions: Developers often lock in financing well ahead of project launches, which may explain resilience in starts even as resale demand softens.
• Government Incentives: Programs targeting affordable and rental construction have boosted multi-family projects, insulating builders from demand-side slowdowns.
• Affordability Gap: Buyers facing high carrying costs are holding back, leaving unsold inventory on the market in some regions.

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Implications for the Mortgage Market

For mortgage lenders, this divergence creates both opportunities and risks.

• On the demand side, slower resale activity means fewer purchase mortgages, particularly in expensive urban centers.
• On the supply side, robust construction translates into continued demand for development financing, commercial mortgages, and, eventually, new buyer mortgages once projects complete.

For borrowers, the picture is equally mixed. Softening sales could give buyers more negotiating power, but higher rates still limit affordability. Meanwhile, more housing starts promise additional supply in the pipeline—potentially easing price pressures in the long run.

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Regional Variation

While the national averages highlight divergence, regional dynamics differ:

• Toronto & Vancouver: Resale markets are cooling fastest, reflecting stretched affordability.
• Prairies: Activity has been more resilient, with sales holding steadier and starts concentrated in mid-sized urban centers.
• Atlantic Canada: Smaller markets continue to attract migration-driven demand, keeping sales relatively stable despite higher borrowing costs.

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Expert Views

Some analysts warn that strong housing starts may be hard to sustain if sales weakness persists. “Developers are building based on policy incentives and long-term need, but short-term demand signals are not as strong,” one market strategist said.

Others see the divergence as a healthy adjustment. “Canada needs supply. Even if sales are slower today, building now ensures inventory when affordability improves,” an economist noted.

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Why It Matters

The September data underline a central tension in Canada’s housing market. Policymakers want to expand supply to cool prices, but households are still wrestling with affordability barriers that suppress demand. For the mortgage industry, this duality means lenders must be prepared for lower near-term origination volumes on resales, even as construction-related financing opportunities grow.

As the Bank of Canada heads into its October 29 policy meeting, these dynamics will be closely watched. A cautious central bank stance on rates, combined with uneven housing indicators, makes the path forward for both borrowers and lenders uncertain.