Despite signs of weakness in resale activity, Canada’s housing starts rose sharply in September, with builders pushing ahead on projects that had been planned months or years earlier. The increase in new home construction might seem to contradict the broader slowdown, but it likely reflects government incentives, backlog clearances, and the long lead time between approvals and ground-breaking. Builders are still cautious, though, as rising material costs, labour shortages, and slower presales are putting pressure on margins.

While construction levels are up in the short term, overall sentiment among developers has softened. Many builders are concerned that rising interest rates and limited buyer demand could lead to oversupply in certain markets, especially urban condo sectors. Others worry that the affordability crisis and tightening credit could slow future absorption rates. This mix of growth and hesitation captures the current mood of the housing industry — active but uncertain, forward-looking but wary of headwinds.

For the broader economy, this dynamic represents both a risk and an opportunity. If demand continues to lag behind supply, prices could fall further before stabilizing. However, the increased pace of construction could help alleviate Canada’s chronic housing shortage once conditions normalize. The next few quarters will be pivotal: if interest rates ease and consumer confidence strengthens, today’s cautious building activity could position the market for a healthier recovery in 2026.

Additional Insight: The tension between housing supply goals and financial reality is now at the forefront of national policy debates. Governments are pushing for record levels of construction to address the housing crisis, but private developers are signaling that the math no longer works without lower borrowing costs or subsidies. This disconnect may lead to policy innovation — including new financing models, public-private partnerships, or targeted tax incentives — aimed at keeping construction alive while protecting affordability.