By Evan Andrade, CHBA Economist
In the second quarter, CHBA’s Housing Market Index (HMI), surveyed over the course of June, continued to reflect highly negative builder confidence about sales conditions. The single-family HMI was 24.9 and the multi-family HMI was 22.8. For interpretation, the HMI is scored between zero and 100 and measures the balance of builders’ opinion about new homes sales. As the score falls further below a neutral score of 50, the higher the proportion of builders surveyed hold negative views about sales. These pessimistic views have continued since 2022, indicating that there will be continued downward pressure on housing starts for freehold or condominium ownership. Policymakers like those at the Bank of Canada are always very interested in CHBA’s quarterly HMI results.
For comparison, the US single-family HMI averaged 35 throughout the second quarter and fell to 32 in August. The US index has remained below a score of 50 for five consecutive quarters. While the drivers of sales conditions are different between the two countries and neither country’s new home market is doing well in recent times, Canada has fared slightly worse since interest rates began rising in 2022.
Canada’s persistently low builder confidence scores are reflected in housing starts for ownership. In the first half of 2025, urban starts of detached, semi-detached, and row units for ownership were 30,800. This is slightly above the totals in the first half of 2024 and 2023, but it remains far below the 40,000 starts seen in in the first half of 2022. Until now, urban multi-family starts for homeownership have been buoyed by longer average timelines, but we’re now seeing those drop as well, having only reached 22,200 in the first six months of 2025. This is far below the urban starts of 31,100 and 32,100 seen in the first half of 2024 and 2023 respectively.
Economic uncertainty from U.S. tariffs
Unfortunately, the recent trade war’s impact on economic certainty and an implementation delay in the GST rebate for first-time buyers likely prevented improvement in the HMI and home sales this year. Interest rates have come down somewhat and now buyers have the option to choose a 30-year amortization, lowering their monthly payment. HMI survey responses suggest that these collective policy changes and lower mortgage rates would have increased sales of entry-level homes if the trade war and tariffs had not happened. However, builders in key regions believe that these changes still would not be enough to improve sales conditions of more expensive move-up homes even if the economic backdrop was better. This is why CHBA is advocating to broaden the GST to apply to all homebuyers, not just first-time buyers, and to increase thresholds in more expensive markets.
General sentiment of consumers and potential homebuyers is also important to consider. The Bank of Canada’s Canadian Survey of Consumer Expectations, released in late July, confirmed that pessimism grew among Canadians regarding their financial health and their comfort in making big purchases in the spring. Unsurprisingly, this was largely driven by the uncertainty surrounding tariffs, the perception of imminent price increases, and low confidence in job security. Consumer confidence was far lower than at the start of the year and in the second quarter of last year, which adds to the challenge of improving sales for both homebuilders and renovators. The extent and speed at which consumer confidence recovers will depend on the timeliness and negotiated concessions of a trade agreement with the U.S.
An important update to Canada’s housing targets
In June, CMHC reevaluated the magnitude of Canada’s housing supply gap needed to materially improve housing affordability, and the findings remained stark. They stated that both the original timeframe of 2030 and affordability target are no longer realistic. CMHC’s revamped estimates provided greater detail on where and what kind of housing is needed to approach house-price-to-household-income ratio levels from 2019 by 2035. The chart below shows how many more starts per year are needed in the four largest provinces over their “business-as-usual” projections over the next 10 years. Unsurprisingly, within these provinces, the bulk of the need for supply increases are greatest within large urban centers. Other provinces, except for Newfoundland and Labrador and New Brunswick, also require large growth in starts per year – presenting an ambitious goal.
New from this year’s reevaluation are the starts required by the intended market to both lower rents and improve affordability of ownership. Across all cities and provinces, except for Quebec, 70 to 80 per cent of the additional starts need to be built for the freehold or condominium ownership market. Between 15 and 25 per cent of the starts increase needs to be comprised of purpose-built rentals and less than eight per cent should be allotted to homes purchased and rented on the secondary rental market.
This highlights the key difference between today’s housing starts for ownership and what is needed to help improve the affordability of housing in Canada. Due to government supports and poor sales conditions, starts of multi-family units slated for the rental market are the highest they’ve been in decades. Within the headline monthly housing starts numbers, the strength of rental construction has masked the struggles of starts for ownership over the past two years. The biggest policy challenge yet is creating a sales environment that facilitates a near-doubling of housing starts for freehold or condominium ownership. This will continue to be the high-level focus of CHBA’s engagement with federal policymakers and advocacy over the coming years.
