Canada’s residential construction sector delivered a stronger-than-expected performance in 2025, with new housing starts rising 5.6% from the previous year to more than 259,000 units — the fifth-highest annual total on record, according to data released by the Canada Mortgage and Housing Corporation (CMHC). Analysts say the report underscores a resilient construction pipeline even as broader economic uncertainty weighs on other segments of the economy.
The December housing start figures were particularly striking: construction activity increased by 11% in the seasonally adjusted annualized rate, reaching 282,439 units compared with 254,625 units in November — comfortably above the median economist expectation of 260,000. Despite this monthly surge, broader six-month trend data showed a slight 0.1% decline, suggesting that most of the annual momentum had already been built earlier in the year.
CMHC’s chief economist, Mathieu Laberge, emphasised that the seasonal strength seen in the winter months followed robust construction activity throughout spring and summer. “Housing starts in 2025 finished ahead of 2024 and inched up in December,” he said, adding that the multi-year recovery in residential building has been supported by ongoing demand for rental units and efforts to tackle affordability challenges.
The performance comes amid broader government efforts to address Canada’s housing shortage and affordability crisis. Former Bank of Canada Governor Mark Carney, now serving as Canada’s Prime Minister, has pledged policy initiatives to support home construction and reduce homelessness while promoting economic stability. Meanwhile, the Bank of Canada has lowered its benchmark interest rate to 2.25%, the lowest level in three years, in part to support economic growth and reduce financing costs for builders and buyers alike.
Industrial observers note that residential construction contributes significantly to employment, materials demand, and local economic activity. A steady flow of housing starts can stimulate sectors ranging from construction trades to manufacturing, particularly in regions with high population growth and persistent demand for new homes.
However, mixed signals from the six-month trend underscore the complexity of Canada’s housing market. While annual totals and monthly data reflect vigorous activity, the slight downward drift in recent months suggests that builders may face headwinds as financing conditions evolve and labour shortages persist. Analysts warn that long-term housing affordability will depend on continued investment in supply, regulatory streamlining, and incentives to unlock more residential development across both urban cores and emerging commuter regions.
Market watchers will be looking closely at upcoming CMHC quarterly reports and central bank announcements, which could illuminate how housing construction interacts with broader economic trends — including consumer confidence, immigration flows, and interest rate policy.
