Canadian Housing Starts Plunge 17% in October, CMHC Reports a Sharper-Than-Expected Slowdown

Ottawa | 19-Nov-2025, 11:10 AM EST —

Canada’s homebuilding sector stumbled sharply in October, delivering one of the deepest monthly declines in recent years and raising new concerns about the country’s construction pipeline heading into 2026. According to fresh data from the Canada Mortgage and Housing Corporation (CMHC), total housing starts fell to a seasonally adjusted annualized rate (SAAR) of 232,765 units, down from 279,174 units in September.

The drop — roughly 17% month-over-month — was significantly steeper than economists expected. Forecasts had pointed to a reading around 265,000 units, suggesting that builders are pulling back faster than anticipated.

Reuters first reported the data and highlighted that this is one of the clearest signals yet that construction momentum is cooling as developers face high borrowing costs, weaker pre-sale numbers, and elevated building expenses.

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A Decline That Surprised Economists

Economists had already anticipated a slowdown after a strong September, but not at this scale.

• The actual figure of 232,765 units represents a deep miss compared with the expected ~265,000.
• The pullback was one of the largest single-month declines since early 2023.
• Market watchers note that this is not simply seasonal — the weakness is broader and more structural.

The data indicates that developers may be increasingly reluctant to start new projects at a time when affordability constraints and financing pressures are reshaping buyer demand.

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Why Builders Are Stepping Back: Key Drivers

1. Higher Construction Financing Costs

Developers often rely on short-term, floating-rate construction loans. Even though rates have stabilized slightly in 2025, borrowing remains expensive relative to pre-pandemic norms.

Higher financing costs reduce profit margins and make launching new projects riskier — especially multi-unit developments that depend on pre-sales.

2. Softer Pre-Sale Activity in Several Regions

While Toronto, Vancouver, and Calgary continue to attract buyers, several secondary markets are experiencing slower pre-construction sales.

Developers generally avoid breaking ground unless a project secures strong pre-sale absorption, so cooling demand directly affects how many projects move forward.

3. Construction Costs Remain Elevated

Supply chain disruptions have eased, but prices for key materials such as lumber, concrete, piping, and wiring remain above typical pre-2020 levels.

Labour shortages in many trades have also pushed wages higher, adding another layer of cost pressure for builders.

4. Fears of Short-Term Oversupply in Urban Multi-Unit Segments

A wave of completions earlier in 2025 added to rental inventory in major cities, especially in downtown cores. With thousands of units hitting the market this year, developers may be waiting to see how new supply gets absorbed before committing to the next cycle.

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Impact on the Canadian Housing Market

Short-Term: Supply Pipeline Softens

Housing starts today determine completion volumes two to three years from now. A sharp slowdown in late 2025 suggests that 2027 supply could be tighter, particularly in fast-growing Ontario and British Columbia markets.

Mid-Term: Prices May Stay Resilient

With supply slowing, the chance of a significant price correction may be limited — even though affordability remains stretched. Many market analysts believe this could keep resale prices relatively firm heading into 2026.

Long-Term: Government Housing Targets Under Pressure

Federal and provincial governments continue to push aggressive homebuilding targets. CMHC has warned that Canada needs 3.5 million additional homes by 2030 to restore affordability.

Repeated monthly declines make these goals increasingly difficult to achieve.

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What Buyers Should Expect Heading Into 2026

For homebuyers watching for price drops, this latest data complicates expectations:

• Less new construction means fewer choices in the years ahead.
• Pre-construction incentives may surface in specific slower markets but won’t be widespread.
• Competition for quality resale listings could intensify if fewer new homes are added to the pipeline.

While high rates have cooled some speculative activity, underlying demand from population growth remains strong, and a construction slowdown tends to keep prices supported.

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What This Means for Existing Homeowners

Borrowers preparing for mortgage renewals in 2025–26 face higher payments due to the end of ultra-low pandemic-era rates. A construction slowdown doesn’t directly affect renewals, but it contributes to a more cautious lending environment:

• Lenders may adopt stricter underwriting for refinances.
• Home-equity access could tighten slightly as lenders manage risk.
• Stable or rising prices due to lower supply may help protect homeowner equity.

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Outlook: A Cautious Start to 2026

Analysts are split on whether the October decline marks the beginning of a deeper downturn or a temporary pullback. Some expect construction activity to rebound modestly if borrowing costs ease in early 2026. Others see a multi-quarter slowdown until pre-sale demand strengthens.

For now, one thing is clear: Canada’s housing starts are slowing, and the October numbers underscore a broader mood of caution shaping the country’s construction outlook.