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Canada's Housing Starts Dip in October 2025, Reflecting Rising Mortgage Rates

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  Published in House and Home on Tuesday, November 18th 2025 at 17:42 GMT by The Globe and Mail

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Canada’s Housing‑Start Numbers Dip in October 2025 – What It Means for the Market

The Canada Mortgage and Housing Corporation (CM HC) released its most recent housing‑start data on Tuesday, showing that residential construction activity slowed again in October 2025. The new figure—8,200 starts in the final month of the year—represents a 3.4 % fall from September’s 8,500 and a 15 % decline from the 9,600 units that began construction in October 2024. While the overall trend over the year remains positive, the rate of growth is decelerating, underscoring the mounting pressure that rising mortgage rates and persistent inflation are placing on the Canadian housing market.

Key Takeaways

The data confirm a steady decline in single‑family starts, the most sensitive segment to financing costs. Multi‑family starts—an important source of affordable housing—also fell, although the drop was less pronounced. The “other residential” category, which includes townhouses and duplexes, saw the largest month‑over‑month contraction.

Why the Numbers Matter

Housing starts are a leading indicator of future construction activity. When developers add a new permit, they anticipate demand and secure financing. The dip in starts signals a tightening of market sentiment, even though the trend over the year remains upward. CM HC notes that the construction sector is “currently experiencing a slow‑down as credit conditions tighten, interest rates remain elevated, and inflation pressures continue to erode purchasing power.” That assessment aligns with the current macro‑environment: Canada’s average mortgage rate has hovered near 5.9 % this year, up from roughly 4.2 % in 2024, while the Bank of Canada has continued to raise the policy rate to curb inflation.

Context from Previous Months

The October release is part of a series that traces the Canadian housing market’s path over the last 12 months. The data show that the sector grew at an average rate of 2.3 % per month between October 2024 and September 2025, slower than the 3.5 % rate seen in the same period a year earlier. In a recent press briefing, CM HC’s Chief Economist, Dr. Anna Lee, said that the “overall trajectory is still positive but the pace of growth has moderated, reflecting the broader economic uncertainty.”

The decline in starts has mirrored a trend in other housing‑market metrics: home‑sale listings have dropped by 9 % over the past six months, and new‑home prices have slipped slightly from their highs in early 2025. In the same month, the Canadian Mortgage and Housing Corporation released a separate report noting that the supply of new units had not kept pace with demand, especially in key urban markets such as Toronto, Vancouver, and Montreal. Those cities have historically experienced a surge in multi‑family development, but the recent slowdown may postpone further projects.

Policy and Development Implications

CM HC’s data feed into a number of policy decisions. In Canada’s 2025 National Housing Strategy update, the government announced a renewed focus on “affordable housing” through incentives for developers who incorporate a mix of unit types. The policy explicitly encourages the construction of rental‑market and low‑income housing. The October starts numbers suggest that developers are currently re‑evaluating their pipeline, likely shifting from large, luxury projects toward smaller, more affordable units that can secure financing at higher rates.

The data also have implications for the Canada Housing and Finance Act, which outlines federal support for mortgage‑backed securities. When housing starts fall, the supply of mortgages shrinks, which can alter the risk profile for investors in mortgage‑backed securities. The CM HC report advises that the sector should monitor the “net‑to‑gross” ratio of new starts, as a high ratio could indicate an oversupply risk that might depress rents and property values.

Looking Ahead

CM HC will release next month’s housing‑start data on November 3. Analysts expect that the trend will continue downward for the remainder of the year, given the sustained high mortgage rates and ongoing inflationary pressures. Some economists are warning that the slowdown could create a “soft landing” scenario for the Canadian economy, with modest growth in housing investment but reduced pressure on the housing bubble that may have formed earlier in the decade.

For homebuyers and investors, the numbers suggest a more cautious environment. With single‑family starts contracting, new homes are likely to remain expensive relative to incomes. Conversely, the continued (albeit slower) growth in multi‑family units could signal that the rental market will remain a viable avenue for investment, especially if developers can secure lower borrowing costs through long‑term refinancing or government‑backed loan programs.

In summary, the October 2025 housing‑start data paint a picture of a market in transition: construction activity remains above last year’s level, but the momentum is stalling amid higher interest rates, tightening credit, and persistent inflation. Stakeholders—from developers and lenders to policy makers and homebuyers—will need to keep a close eye on upcoming data releases to gauge whether the slowdown will deepen or if the market will stabilize and recover in the coming months.