Canada’s housing engine is losing momentum, and CMHC expects that drag on new construction to persist for years – a key risk for anyone betting on supply catching up to demand any time soon.

According to Canada Mortgage and Housing Corporation (CMHC), the six‑month trend in housing starts fell 3.5 percent in January to 254,794 units on a seasonally adjusted annual rate basis, marking the fourth straight monthly decline.

CMHC said actual housing starts in centres with at least 10,000 people were essentially flat, up just 1 percent year over year, while the monthly pace of starts dropped 15 percent in January and reversed December’s gain, underlining how choppy the data has become.

CMHC deputy chief economist Tania Bourassa‑Ochoa said the weakening trend “is in line with recent signs of slowing momentum in residential construction.”

Bourassa‑Ochoa added that trade and geopolitical uncertainty, high construction costs, weaker demand and rising inventories are likely to keep new construction trending lower.

She said near‑term improvements in housing supply are unlikely as these constraints weigh on developer activity.

The bigger concern lies in the medium‑term outlook.

In its latest Housing Market Outlook, CMHC said new home construction is set to decline through 2028 as higher costs, softer demand and more unsold units – particularly in the condominium segment – continue to pressure builders.

CMHC expects housing demand to remain subdued at the national level, with sales staying below historical averages and prices only posting modest gains after falling in 2025.

Regional divergence matters.

CMHC said construction and home sales in Ontario and British Columbia are expected to remain below their 10‑year averages, while the Prairies and Quebec should stay above historical norms.

Deputy Chief Economist Kevin Hughes said CMHC expects Canada’s economy to grow slowly in 2026 as households and businesses remain cautious amid geopolitical and trade uncertainty, which is leading buyers to delay purchases and making builders more hesitant to launch projects.

At the city level, CMHC reported that recent data already show a split picture: Vancouver posted a 37 percent increase in actual starts in January, Toronto saw a 2 percent drop and Montreal recorded a 44 percent decline, largely due to weaker multi‑unit and single‑detached activity.

Looking ahead to 2026, CMHC expects Toronto and Vancouver to face ongoing pressure from slowing condominium construction, elevated vacancy rates and weaker rent growth, while stronger local conditions could help support activity in markets such as Montreal and Calgary.

Ontario is a partial outlier in the near term, but not a clean one.

Global News reported that CMHC data show a 12 percent increase in Ontario housing starts in January 2026 compared with a year earlier, after years of declines tied to weak pre‑construction sales.

According to Global News, most of the new units were in multi‑residential buildings, with single‑detached starts still limited, reflecting oversupply and soft demand in that segment.

The outlet also reported that the Ford government remains well short of its target of 1.5m new homes by 2031 and has already acknowledged that the goal is a “soft target.”

CMHC Sounds Alarm of Fading Housing Starts While Demand Stays Muted by Freschia Gonzales | WP Wealth Professional