Decrease in issued building permit values and potential implications for home-buying prospects
Canada's Housing Construction Slows Down, but Permits and Starts Remain Robust
According to a recent report by Statistics Canada, the housing construction sector in Canada is experiencing a notable slowdown, as indicated by the decline in building permits in the second quarter of 2025. The total value of building permits fell by $1.9 billion to $36.7 billion, with a significant 15% drop in residential permits to $21.7 billion.
The decline was primarily driven by reductions in multi-family permits, particularly in Ontario and British Columbia, including steep drops in the Toronto and Vancouver metropolitan areas. Single-family permits also decreased, mainly in Ontario and Alberta.
However, despite this decline in permits, housing starts in July 2025 were relatively solid, with an annualized rate of 294,100 units, up 4% from June. This growth was mainly fueled by multi-family urban housing. The strong rental demand and government financing programs are supporting this trend, though some cooling is expected in 2026 as population growth slows and housing demand dynamics evolve.
The federal government's goal to double the housing construction pace faces challenges given the recent permit declines. Mike Moffatt, the founding director of the Missing Middle Initiative at the University of Ottawa, expressed concern about the potential consequences of a prolonged period of fewer homes being built. He stated that if there is a period of two or three years where few homes are built, big price increases could occur once the economy improves and there is a high demand for homes.
Moffatt believes that immediate plans may be needed to spur development quickly to avoid a surge in home prices. He suggested lowering the GST on home construction as one possible example of immediate plans to spur development. Although the Build Canada Homes plan could be transformative, Moffatt believes that something is needed to bridge the gap between now and its implementation.
It's important to note that residential projects can include single-family dwellings, such as a detached or semi-detached house, or a freehold townhouse, as well as multi-unit dwellings of two units or more, such as a duplex, a low-rise apartment building, or a high-rise condominium.
Additional context from CMHC notes that although condominium pre-sales have declined markedly in Vancouver and Toronto, there remain many pending building permits for thousands of condo units that may still proceed to construction, reflecting earlier pre-sales activity.
In summary, the current state of housing construction in Canada shows a notable decline in building permits, particularly in the residential sector. Despite this, existing permits and current starts suggest ongoing, though potentially slowing, building activity in the near term. Immediate plans may be needed to spur development quickly to avoid a surge in home prices when demand picks up again.
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