Canada's housing market kicked off 2025 with a positive sign, as the annual pace of housing starts rose by three per cent in January compared to December. According to the Canada Mortgage and Housing Corporation (CMHC), this increase was primarily driven by a surge in multi-unit construction projects in Québec and British Columbia.
A Promising Start to the Year
The CMHC reported a seasonally adjusted annual rate of 239,739 housing starts in January, up from 232,492 in December. The increase was fuelled by urban housing starts, which also grew by three per cent to reach 220,643 units.
A closer look at multi-unit urban starts, including apartments, condominiums, and townhouses, showed an impressive eight per cent rise. This growth was particularly strong in Montréal and Vancouver, where purpose-built rental projects contributed significantly to the upswing. Montréal alone experienced a staggering 112 per cent year-over-year increase in housing starts, while Vancouver saw a 37 per cent jump.
However, the picture was not uniformly positive across the country. Toronto saw a sharp decline, with housing starts plummeting by 41 per cent compared to January 2024. The drop was attributed to a slowdown in multi-unit construction in the city.
Meanwhile, rural housing starts were estimated at 19,096 units, contributing to the overall increase in new construction.
Long-Term Outlook and Trade Risks
Despite the positive momentum in January, CMHC cautioned that housing starts are expected to slow between 2025 and 2027. The primary reason for this projected decline is a decrease in condominium developments, as investor interest weakens and demand from young families stabilizes.
Adding to the uncertainty are foreign trade risks, particularly potential U.S. tariffs on Canadian goods. CMHC deputy chief economist Tania Bourassa-Ochoa highlighted that these risks pose "significant uncertainty for housing construction going forward."
The agency's latest market outlook suggests that while home sales and prices are expected to recover this year due to improved borrowing conditions, external factors could cloud the longer-term forecast. A potential trade war between Canada and the U.S. could slow economic growth and limit housing activity. If high tariffs were imposed, inflation could temporarily rise, prompting the Bank of Canada to lower interest rates in an effort to support the economy. However, this scenario could also prolong a housing market recovery, leading to delayed home purchases and fewer housing starts overall.
What This Means for Buyers and Builders
For prospective homebuyers, the early-year increase in housing starts could signal more supply coming to market, potentially easing some affordability pressures. However, ongoing trade risks and potential economic slowdowns could impact borrowing costs and market confidence in the long run.
For developers, the current surge in multi-unit construction—especially in cities like Montréal and Vancouver—reflects strong demand for rental housing. But the broader economic uncertainties mean that builders should keep a close eye on trade policies and market shifts that could influence future construction activity.
Conclusion
While January's rise in housing starts is an encouraging sign, the market's trajectory remains uncertain. As economic conditions evolve, particularly in relation to trade agreements and interest rates, both buyers and builders will need to stay informed and adaptable. The coming months will be crucial in determining whether this positive trend can be sustained or if external pressures will slow the pace of new home construction.
