Value of residential construction

Residential construction value is expected to decline by 0.5% in 2026 amid an uneven economic backdrop and persistently high borrowing costs. Job growth remains soft, and after a series of interest-rate cuts made through the last year, monetary policy has largely shifted to a holding pattern, leaving mortgage rates elevated as rising bond yields continue to pass through to lending rates. These conditions are limiting the strength of any housing rebound, raising the risk profile of new projects and weighing on builder sentiment. CMHC anticipates weaker housing demand in provinces such as Ontario and British Columbia, which is likely to depress housing starts and, by extension, the overall value of residential construction. Even so, federal housing-investment assistance under the Carney government will provide some offset by funding housing-related infrastructure, such as wastewater systems, that supports new builds and can reduce development charges should municipalities take part, which is set to temper the downturn.

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. The value of residential construction fell at CAGR 3.6% over the five years 2026.