Canada Housing Slows
Canadian Housing Starts Drop Significantly in July as Higher Borrowing Costs Weigh on Supply
Key Points
July housing starts fell 4.9% month over month to a seasonally adjusted annual rate of 229,074, with economists previously expecting around 250,000 starts; June also saw a decline of about 5.6%.
Vancouver starts plunged 42% in July, while Toronto starts declined about 10% on weaker multi-unit construction.
In centres with populations of 10,000 or more, July starts were down 19% year over year, and year-to-date starts have fallen about 4%.
Completions rose in July despite the softer start pace, signaling some supply entering the pipeline even as new construction slows.
Analysts say higher borrowing costs and persistent affordability challenges are weighing on new housing supply, which could ease near-term price pressure but keep inventories tight for buyers.
Canada's housing starts fell 4.9% in July to a seasonally adjusted annual rate of 229,074 units, missing analyst forecasts of around 250,000, according to Market Screener. It marks the second straight monthly drop, after June saw a 5.6% decline.
The pullback was broad-based. Single-detached and multi-unit projects both weakened. Higher borrowing costs and stubborn affordability problems are squeezing builders, The Wall Street Journal reported. The data signals a cooling in new housing supply even as the resale market shows some signs of life.
Vancouver and Toronto Lead the Nationwide Decline
Urban centers drove much of the drop. Vancouver starts plunged 42% in July. Toronto starts fell about 10%, hurt by weaker multi-unit construction, according to Market Screener. Both cities had relied heavily on apartment and condo projects to keep activity high. That engine is now stalling.
In towns and cities with populations of 10,000 or more, starts were down 19% compared to a year earlier. Year-to-date starts have also slipped about 4% below last year's pace. The numbers point to a consistent, not just one-month, slowdown in new home building across the country.
Higher Borrowing Costs Squeeze Builders and Buyers
Analysts point to one main culprit: the cost of borrowing. Higher interest rates make it more expensive for developers to finance new projects. They also price out buyers, reducing demand for new homes. When demand softens, builders pull back on breaking ground.
The result is a tightening pipeline. Fewer starts today means fewer new homes available in the months ahead. That keeps inventory lean for buyers already struggling with affordability. In the short term, slower construction could ease some upward pressure on prices. But it does little to fix the supply shortage Canada faces.
Completions Rise Even as New Starts Slow
Not all the news was grim. Completions — homes that are fully finished and ready to occupy — actually rose in July, according to Market Screener. That means some supply is still entering the market, just not as fast as before. Projects started months ago are crossing the finish line.
The resale market also showed a partial bright spot. Home sales continued to rise even as new construction slowed. That divergence matters. It suggests buyers are still active, but they are turning to existing homes rather than waiting for new ones. Demand has not disappeared — it has shifted.
What a Slower Pipeline Means for Canada's Housing Market
Canada was already short on housing before starts began to slide. The back-to-back monthly declines deepen that gap. Multi-unit projects — apartments and condos — have been the main engine of new supply in recent years. Their slowdown removes the single biggest source of new inventory.
The July data lands at a delicate moment. The Bank of Canada has cut rates in recent months to support the economy, but borrowing costs remain well above their pandemic-era lows. Until financing gets cheaper and builder confidence returns, new housing supply is likely to stay under pressure well into 2025.
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