Dim outlook for new home construction in Ontario and BC as sentiment of Canada’s new home construction industry stays in near record-low territory

OTTAWA – April 15, 2025 – The Canadian Home Builders’ Association (CHBA) 2025 Q1 Housing Market Index (HMI) is in its eleventh quarter of negative sentiment since dropping from the post-pandemic highs in 2021 and early 2022. CHBA’s single-family HMI is 26.4 for Q1 2025 (out of 100). This score remains close to the index’s record low of 24.6 in Q4 2023 and is down 8.5 points from the score from the same time last year. The multi-family HMI is 22.3, which remains essentially at its record low score of 22.0 from Q4 2024. While industry sentiment has been low for eleven quarters, builders have typically remained optimistic that future sales would be an improvement over their current sales conditions (though still in negative territory). However, that optimism has dissolved: for the first time since the HMI started, the majority of both single- and multi-family builders rated their expectations for future sales as “poor” and worse than their current state.

Sustained poor selling conditions are hitting Ontario and British Columbia hard. The numbers are shocking in Ontario, with the single-family HMI at 7.4 and the multi-family HMI at a dismal 2.9, reflecting a very grim future for starts in Ontario in the year ahead and beyond. Sentiment is only marginally better in British Columbia, which avoided a further decline but remains at an abysmal level of 17.2 for single-family sales and 24.8 for multi-family sales. Neutral sentiment for single-family homes in the Prairies and moderately positive scores for multi-family in the Prairies and single-family in the Atlantic provinces buoyed the national index slightly. These areas of Canada are generally more affordable.

The pessimistic results of the HMI in recent quarters are also playing out as expected by CMHC’s housing starts data, released today. Starts in areas with at least 10,000 population in the first quarter of 2025 fell 9% year-over-year nationally to 45,302 units, with the regional starts consistent with the HMI’s findings. Ontario saw the largest contraction, declining 38% over this time last year, falling 6,722 units, with Toronto falling 65% year-over-year for March. The decline in British Columbia was 30% or 3,234 units, with Vancouver falling 59% year-over-year for March. Atlantic Canada saw a milder decline of 14% or 417 units. Prairies managed a strong 24% increase of 2,727 units. These housing starts largely reflect sales conditions over the past three years or more, particularly of multi-family high rises.

The slow sales and low sentiment stem from affordability challenges, including the rising cost of construction, which builders named as their top challenge going into 2025, horribly high development charges in Canada’s larger urban centres, mortgage rates remaining higher than inflation, and ongoing economic uncertainty due to tariffs. The escalating trade war threatens residential construction primarily through lower consumer demand, with some increase in construction costs, which are already above levels that many would-be homeowners can bear. The average construction material cost to build a 2,400 sq. ft. home has risen by nearly $98,000 since early 2020.

In Q1, with the threat of tariffs looming, 71% of builders said they had already received supplier notification of price increases. When asked what percent of the value of their building materials are made in the United States and could be subject to tariffs, the builders’ most common answer was 11-20%. Only 10% believe the value of American-made materials is 31% or more. Appliances and plumbing materials and fixtures are the product categories most exposed to U.S. imports.

“It is critically important that the next government prioritizes housing affordability through smart, long-term policies. With the ongoing Trump tariffs causing economic uncertainty, it is especially important that government policies do what they can to encourage more housing supply to correct the shortage and improve affordability in market-rate housing, especially for homeownership. Election promises to decrease rampant development charges and reduce the GST on new homes are a good first step but must go further. We also need long-term alternative funding models for how municipalities finance new and aging infrastructure in a way that does not unfairly put the burden on new home buyers, most of whom are younger. So much more can be done, including making mortgages more accessible to well-qualified buyers, improving municipal development processes and timelines, and supporting productivity through de-risking industry investment in factory-based production,” said CHBA CEO Kevin Lee.

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MEDIA INQUIRIES
Journalists wishing to interview Kevin Lee, Chief Executive Officer of the Canadian Home Builders’ Association are encouraged to submit their request by email to media@chba.ca.

About the HMI
CHBA’s HMI provides a leading market indicator for both the single-family and multi-family markets in Canada, before permits and starts. Released on a quarterly basis, the HMI provides insight into the industry, including many of the issues that are affecting housing affordability, with a strong correlation to future housing starts. The data for the CHBA HMI comes from an exclusive panel of hundreds of CHBA home builders and developers from coast to coast. Every quarter, this panel responds to a series of questions about market conditions. CHBA then uses proprietary statistical analysis to prepare the quarterly HMI. In addition to the standard HMI questions, each quarter CHBA asks “special questions” that allow the Association to gather data and insights into current issues affecting the industry across the country.

For more information on CHBA’s HMI, including the detailed methodology and key takeaways, please visit the official CHBA HMI webpage.