Real estate developers pulled back on plans to build in Canada for the first time in 15 months, with plans to build new homes showing the sharpest drop among property categories.
This means there could be even fewer homes available for would-be buyers in the near future, which could drive up prices unless developers show more intention to build.
“We’ve reached a point where home building costs have gotten so high relative to the price of homes that it’s just not viable to build — particularly in the Greater Toronto Area. The condo market is all but dead, but the report also shows that it’s on the single-family home,” says Mike Moffatt, founding director of the Missing Middle Initiative at the University of Ottawa.
“My big concern is that if we go through a period of two or three years where we’re really not building that many homes, and once the economy gets better, all of those buyers who are on the sidelines are going to want to go out and buy, and there’s not going to be a lot of inventory for them and we might start to see big price increases again.”
Statistics Canada reported on Tuesday that the total value of approved building permits in June decreased by nine per cent to $12 billion, compared to $13.1 billion in May, which was a stronger month for growth in Canadian permit values.
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The value of permit applications indicates real estate developers’ intentions to build in the near future.
The agency says that with June’s report capping off the second quarter of 2025, it also marked the first quarterly decline following five consecutive increases, or 15 months.
Although the intention to build non-residential projects such as office buildings and warehouses led the decline in permit values for June, the second quarter of the year, spanning from April to June, showed the value of residential units as a whole fell the most.
Residential projects can include single-family dwellings, such as a detached or semi-detached house, or a freehold townhouse. Residential can also include multi-unit dwellings of two units or more, such as a duplex, a low-rise apartment building or even a highrise condominium.
Although there is a need now for more homes in Canada, and much more in the next few years, developers still don’t intend to build enough to meet that demand, the data indicates.
When it comes to new real estate projects, the costs involved may be the biggest issue limiting developers’ intentions to build.
“We’ve hit a situation right now where (home sale) prices have come down, and that’s a good thing — prices were too high, and we do have a lack of affordability. But the challenge is that costs (to build) haven’t decreased. And in fact, in many cases, costs have gone up,” says Moffatt.
“The trade war is certainly tamping down demand and not helping the situation with home building. There’s also tariff uncertainty as a lot of the things that we bring in to build a home are from the United States, making it more expensive and is contributing to the increasing cost of home construction.”
This data from Statistics Canada also comes as Prime Minister Mark Carney unveiled further details for his government’s new Build Canada Homes plan (BCH), which aims to build almost 500,000 new homes each year for the next decade.
Although the BCH plan could be a solution to the low supply of available housing, more immediate plans may be needed to spur development quickly in order to avoid a surge in home prices.
“I do think there are things that governments need to do immediately,” says Moffatt, pointing to calls to lower the GST on home construction as one possible example.
“Even if we believe that Build Canada Homes is going to be transformative and address some of these issues of the industry, a lot of that’s not going to happen for two to three years or more. So we need something to bridge that gap.”
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