Canadian Housing Starts Drop Sharply in October, Signalling Construction Slowdown

Toronto | November 19, 2025 — 09:00 EST

Canada’s homebuilding activity took an unexpectedly sharp downturn in October, raising new concerns about the strength of the country’s construction pipeline heading into 2026.housing starts fell to a seasonally adjusted annualized rate (SAAR) of 232,765 units, down from 279,174 units in September.

The decline amounts to a steep 17% month-over-month drop, significantly worse than economists’ expectations of roughly 265,000 units, according to Reuters. The numbers confirm that builders across the country are becoming noticeably more cautious as financing costs, pre-sale softness, and broader economic uncertainty converge.

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A Deeper-than-Expected Pullback

Economists had anticipated a moderate slowdown after a strong September showing, but the October decline exceeded even the most pessimistic forecasts.

• The SAAR of 232,765 units is well below the forecast of ≈265,000 units, reflecting a clear loss of momentum.
• Multi-unit urban housing, typically the dominant driver, saw the most significant drop, pointing to hesitation among developers who rely heavily on pre-construction sales.
• The scale of the pullback is one of the sharpest since early 2023, marking a shift from the relative resilience seen earlier this year.

Builders appear to be reacting not just to seasonal factors but to structural pressures that complicate launching new projects.

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What’s Behind the Slowdown

Higher Borrowing Costs

Construction financing remains expensive. Many developers rely on short-term, floating-rate loans, and even though interest rates have eased slightly from 2023 highs, borrowing costs remain elevated compared with pre-pandemic norms.

This reduces profitability and makes new projects riskier to start.

Softness in Pre-Sale Activity

Pre-construction sales have cooled in several regions, especially smaller cities and the Atlantic provinces. Without firm pre-sales, developers hesitate to move forward with large multi-unit projects.

Persistent Material and Labour Costs

Although supply chains have stabilized, the cost of key materials — lumber, drywall, insulation — remains above historical averages. Labour shortages continue in many trades, pushing wages up.

This combination squeezes builder margins and slows project approvals.

Concerns About Short-Term Oversupply

Major metros like Toronto, Montreal, and Calgary saw a wave of completions earlier in 2025. With many new rental and condo units hitting the market, some developers are waiting to see how demand absorbs recent supply before committing to new starts.

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Impact on the Broader Housing Market

The October data signals that fewer homes will be built in the near future, and that has several consequences for the overall housing landscape.

Supply Constraints Ahead

Slower starts today mean fewer completions in 2026 and 2027. Canada’s long-standing supply shortage could tighten further, especially in fast-growing metro areas.

Possible Price Stickiness

A slowdown in supply can keep prices from falling significantly, even in a higher-rate environment. Buyers waiting for a major correction may not see one unless demand weakens sharply.

Pressure on Government Housing Targets

Federal and provincial governments continue to emphasize long-term housing supply goals, including Ottawa’s well-publicized 3.5-million-home target by 2030. Repeated monthly declines make these targets harder to reach.

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What Buyers Need to Know

For buyers navigating the market:

• Affordability won’t improve quickly if supply tightens.
• Pre-construction discounts may appear in select regions where developers need to boost absorption.
• Competition for quality resale inventory could intensify if fewer new homes are built.

The construction slowdown does not necessarily mean weaker demand; instead, it points to a supply imbalance that could persist.

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What Homeowners Should Watch

Homeowners heading into renewals in 2025–26 are already dealing with higher mortgage costs. While today’s data focuses on construction activity, it indirectly highlights a broader theme: financial caution among both builders and households.

• Most five-year fixed borrowers coming up for renewal will still face 10–20% higher payments.
• Variable-rate borrowers may see modest relief if rate cuts continue cautiously into 2026.
• Home-equity lending could tighten if lenders turn more conservative in a cooling construction climate.

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Outlook for Early 2026

Economists are divided on whether October’s numbers represent a temporary pause or the beginning of a more prolonged slowdown. Some expect a mild rebound in early 2026 if borrowing costs stabilize. Others believe developers will remain cautious until pre-sale activity shows clear signs of improvement.

For now, the October data serves as a clear signal: Canada’s construction pipeline is slowing, and the market is entering a period where supply growth may not keep pace with demand. That dynamic could shape prices, borrowing behavior, and housing availability well into 2026.