Canada: September Housing Demand Eased While Supply Edged Up

Canadian homebuilding activity edged up to nearly 249k in September from a significantly revised 242k in August—initially reported at about 229k. Multi-unit construction increased, while single-family starts pulled back (graph 1). The Canada Mortgage and Housing Corporation (CMHC) emphasizes the 6-month trend, which rose marginally to 250k but remains well below CMHC’s External link. target of 417k to 469k annual starts needed to restore pre-pandemic affordability.

Regionally, British Columbia led the gains in housing starts in September, while Ontario also edged higher. Quebec pulled back but remains ahead on a year-to-date basis. Gains were also recorded in smaller provinces, including New Brunswick and Manitoba.

In the resale market, seasonally adjusted home sales fell 2.3% m/m in September following four consecutive months of growth. Nationwide, new listings fell 1.8% while inventory edged up to 4.9 months. The sales-to-new-listings ratio eased to 48.8% but remained in balanced territory. Average home prices gave back their gains since April, while the benchmark price also declined.

Toronto and Vancouver remained in buyer’s market territory as sales retreated sharply in both cities. Activity was weak across most of Canada’s major centres, but this year’s price correction remains concentrated in Ontario and BC. This continues to weigh on the national average even as prices broadly rise elsewhere (graph 2).

Homebuying activity remains subdued heading into the fall. Improved affordability in some of Canada’s most expensive markets may have opened opportunities for previously priced-out households, but the recent rise in fixed mortgage rates adds another headwind. Alongside economic uncertainty, a softer labour market External link. and slower population growth External link., the longer-term decline in residential mobility External link. could also constrain near-term activity.

Housing starts continue to be supported by a number of policy measures, including reducing development charges External link. in some municipalities, removing or reducing GST/HST on new homes External link. for qualified buyers and CMHC financing programs for purpose-built rental construction. These programs may help keep construction stronger than current economic and demographic conditions would otherwise suggest. However, the outlook varies across markets and housing segments, with the current rental construction boom External link. potentially coming at the expense of future homeownership supply.

Oil prices External link. and trade tensions with the US External link. pose upside risks to inflation External link., while back-to-back months of job losses External link. point to downside risks to the economy External link.. Next week’s CPI release should provide an important read on whether inflationary pressures are enough to push the Bank of Canada External link. to bring forward a rate hike from our Q1 2027 baseline External link..