Canada’s housing market continued to show resilience in July, as new construction activity picked up across the country.

Canada Mortgage and Housing Corp. (CMHC) reported that the annual pace of housing starts rose 4% compared with June, reaching a seasonally adjusted annual rate of 294,085 units, up from 283,523.

Urban centres with populations of 10,000 or more accounted for an annual rate of 273,618 units, an increase of 5% from June’s 261,171. Rural housing starts were estimated at 20,467 units.

On an actual basis, housing starts in July for larger centres totaled 23,464 units, up 4% from 22,610 in July 2024.

The six-month moving average of overall housing starts, a key indicator that smooths out monthly volatility, rose to 263,088 units, marking a 3.7% increase from June.

This sustained pace suggests builders remain active despite ongoing affordability challenges, higher financing costs, and tariff uncertainty.

“Through the first seven months of the year, actual housing starts have remained above 2024 levels, primarily driven by increased multi-unit starts in the Prairie provinces and Québec,” said Tania Bourassa-Ochoa, CMHC’s deputy chief economist.

“These persistently elevated national results are reflective of investment decisions made months or even years ago, highlighting the influence of previous market conditions and builder sentiment on current construction trends.”

Potential Buyers Still Cautious, Says CHBA CEO

Kevin Lee, CEO of the Canadian Homebuilders’ Association, said the trade war with the US has had a chilling impact on homebuying demand.

“The US tariffs on Canadian goods mostly affect prices of construction materials in the US, rather than Canada, but CHBA’s second-quarter Housing Market Index (HMI) suggests that the economic uncertainty surrounding US tariffs and possible Canadian counter tariffs is keeping buyers on the sidelines and holding back sales, resulting in slower housing starts,” Lee told Real Estate Magazine. “This is further increasing Canada’s housing supply deficit, while dampened sales and construction activity are also causing hardship in some regions for industry and workers, especially in Ontario and British Columbia.”

Lee said CHBA has recommended that the federal government avoid retaliatory tariffs on construction goods to “avoid inflating home-building costs in an already difficult environment.”

“Further, to both reduce the effects of US tariffs and support Canada’s residential construction industry, the federal government can bring the cost of other aspects of construction down, principally the GST, working with provinces to have municipalities lower development charges, stopping increasing the cost of construction through code changes, and continuing to eliminate interprovincial trade barriers, among other housing supply and affordability actions, which will support more housing supply and stronger economic growth.”

“Crisis of Confidence”

Carl Gomez, CoStar Group chief economist, said the latest tariff hike to 35% from 30% on Canadian imports will have minimal impact on the economy because the vast majority of goods are protected under the Canada-United States-Mexico Agreement (CUSMA).

Similarly to Lee, he said the biggest impact the tariffs are having on the homebuilding sector is on consumer sentiment.

“The home building industry is dealing with a crisis of confidence from its main customers,” he said. “The geopolitical risks that are coming from trade wars, how that’s affecting the psyche of homebuyers, is the biggest factor there. Obviously, a lot of folks today are showing no appetite to make a big purchase like real estate.”

And as a result, he said, many home builders are now suffering with “excess or bloated inventories,” especially when it comes to condos.

“A lot of developers need those pre-sales to get moving on projects, and before all of this, even with slightly higher interest rates and then the interest rates coming down, the pre-sales were still starting to fall off a cliff,” said Gomez. “So they’re sitting on unrealized value there, and that’s a problem.”

Housing Starts Edge Higher in July in The Face of Tariff Unease by Courtney Zwicker | Real Estate Magazine