Desjardins Housing Outlook: What’s Driving the Resilience of Housing Starts in the Face of Adverse Homebuilding Conditions?

Housing starts are a key economic indicator, reflecting construction activity and new housing supply in the economy. In Canada, housing starts have been resilient in the face of adverse homebuilding conditions. The multi-unit segment, in particular, has been defying expectations.

Mortgage and business lending rates remain high, despite recent interest rate cuts. The industry has also faced high building construction costs and must contend with an aging workforce. Uncertainty around the economic outlook, given the threat of tariffs and planned slower population growth, also has builders worried. Together, these are all contributing to low builder confidence.

In practice, various structural, policy and market factors may sustain housing starts beyond what traditional economic frameworks would predict. For instance, tight rental market conditions paired with government incentives have spurred recent purpose-built rental construction.

Looking forward, housing starts are likely to slow but remain elevated by pre-pandemic standards. We expect purpose-built rental construction to remain elevated, while the condo market experiences significant weakness for all of the reasons we’ve highlighted in this report. Single-family homebuilding represents a much smaller portion of the market and should continue to see interest from buyers, as mortgage rates are well down from their recent peaks.