Canada Housing Starts to Fall As Condo Glut Chills Development

Canada’s homebuilding pipeline is heading for a slowdown as developers grapple with a surge of unsold units, weakening demand and rising construction costs.

Housing starts are expected to decline between 2026 and 2028, according to a new outlook from the Canada Mortgage and Housing Corporation, signaling a reversal after years of aggressive development fueled by immigration-driven population growth, the Wall Street Journal reported.

The forecast highlights growing stress in the country’s residential real estate sector, where sales and prices have cooled after the Bank of Canada’s rapid interest-rate hikes. The agency said unsold inventory climbed to record levels across the nation’s seven largest housing markets, with the bulk of those units concentrated in the condominium sector.

Toronto and Vancouver — Canada’s priciest housing markets — have been hit especially hard. Analysts said the condo market in both cities has effectively stalled, according to the publication, leaving developers sitting on units that once would have been snapped up by investors and presale buyers.

Urbanation, a Toronto-based housing analytics firm, reported earlier this year that condo sales in the Greater Toronto Area plunged in 2025 to their lowest level in more than four decades.

That backlog is already rippling through the development pipeline.

“When completed units don’t sell, lenders restrict credit and developers delay or cancel new projects because many rely on high presale thresholds to secure financing,” CMHC said in its report. “This slows the pipeline of future housing supply.”

The downturn is arriving even as recent construction activity appears strong on paper. Housing starts rose 6 percent in 2025 to about 259,000 units, with activity exceeding the 10-year average in most markets, according to the report.

But CMHC officials said those projects largely reflect decisions made years earlier, when population growth was surging and borrowing costs were far lower.

Tania Bourassa-Ochoa, the agency’s deputy chief economist, said developers are now pulling back as market conditions deteriorate. Confidence among construction firms has already fallen to record lows, according to the Canadian Home Builders’ Association.

At the same time, existing-home sales have dropped nearly 20 percent from year-ago levels, while prices remain about 19 percent below their February 2022 peak.

— Eric Weilbacher