Value of residential construction

Residential construction value is projected to grow 2.1% to reach $166.4 billion in 2026, representing an annualized rate of decline of -3.0% over the five years through 2026. This stabilization reflects the early impacts of Bank of Canada interest rate cuts that began in mid-2024, with reduced borrowing costs unlocking pent-up housing demand and improving project economics for developers.

Housing starts have demonstrated surprising strength in recent years, providing support for construction investment levels. Starts jumped 2.1% and 3.5% in 2023 and 2025, driven by surges in Toronto and Montreal where multi-unit construction more than doubled year-over-year. This momentum reflects developers responding to improved market conditions by launching projects that had been delayed during the high interest rate period.

The past five years have witnessed extreme volatility in residential construction, characterized by a post-pandemic boom followed by a sharp contraction, then a return to growth. Activity exploded in 2021, surging 14.0% to reach an all-time record of $194.2 billion as historically low interest rates, remote work trends driving housing preferences, and massive household savings fueled unprecedented demand. This boom proved unsustainable once the Bank of Canada began its aggressive tightening cycle, with residential construction value plunging 9.0% in 2022 as rising mortgage rates killed affordability and froze markets.

The contraction accelerated in 2023, with residential construction value falling another 9.1% to as interest rates reached their highest levels in decades and new housing investment collapsed. Activity remained roughly level in 2024. Toronto has been particularly hard hit, with 2025 on pace to record the lowest housing starts in three decades as condominium pre-construction sales collapsed and developers cancelled or delayed projects facing cost overruns, high development charges, and time-consuming approval processes. Vancouver similarly saw construction activity remain depressed, though Prairie cities including Calgary and Edmonton bucked the national trend with record-high starts supported by strong interprovincial migration and relatively affordable housing prices.