What Happened

The Canada Mortgage and Housing Corp. (CMHC) has released projections indicating that the annual pace of housing starts will fall to approximately 247,000 units in 2026, a decline from the 259,000 starts recorded in 2025. This forecast follows a reported six per cent drop in the seasonally adjusted annual rate of housing starts in June compared to May. Kevin Hughes, CMHC’s deputy chief economist, stated that economic caution is leading households and businesses to delay home purchases and construction commitments.

The agency expects national home sales to remain below historical averages in 2026, with prices showing only modest gains after declines in 2025. While Ontario and British Columbia are expected to rebound from weak levels, Ontario could see further declines in starts before a recovery begins in 2027. British Columbia is also projected to experience a marked decline in construction activity.

Conversely, construction in the Prairies and Quebec is forecast to remain above historical averages. The condo sector is likely to see the sharpest slowdown, particularly in Toronto and Vancouver, where developers are focusing on finishing existing projects rather than starting new ones. CMHC anticipates significant differences across the country in housing market activity as high unemployment and modest income growth limit demand.

Why It Matters

The projected drop in housing starts to 247,000 units signals a significant cooling in Canada’s construction cycle, driven by persistent economic uncertainty and trade risks. This slowdown affects the supply pipeline for new homes, which has long-term implications for affordability and inventory levels. As households delay buying due to geopolitical and trade uncertainty, the immediate demand for new construction diminishes, forcing developers to prioritize completing current projects over launching new ones.

The divergence between regions highlights that national averages mask local realities. While the Prairies and Quebec maintain stronger construction momentum, major markets like Ontario and British Columbia face deeper corrections. This regional split means that housing market recovery will not be uniform, with some areas experiencing prolonged periods of lower activity and others stabilizing faster. The expected modest price gains suggest that the market is adjusting to a new equilibrium rather than crashing, but the lack of new supply growth could eventually constrain options for buyers.

Local Vancouver / Burnaby Context

In British Columbia, the CMHC forecast points to a marked decline in housing starts, aligning with broader trends in major urban centers. Vancouver and Toronto are specifically cited as facing weaker sales and construction, with the condo sector likely to see the sharpest slowdown. This reflects a shift in developer behavior, where capital is being directed toward finishing existing projects rather than initiating new developments in high-cost environments.

For the Greater Vancouver area, this slowdown in new starts contributes to a tightening of future supply, even as current demand remains subdued. The expected rebound from weak levels in BC suggests that the market has already priced in much of the current caution, but the pace of recovery will depend on broader economic conditions. Rental markets in major cities are also shifting, with rising vacancy rates indicating a temporary easing of rental pressure, though long-term affordability remains a concern due to the projected drop in new construction volume.

Market Impact

The decline in housing starts will likely lead to a gradual reduction in new inventory availability over the next 12 to 24 months. For existing homeowners, this could support price stability as supply growth slows, but it may also limit options for first-time buyers who are already facing affordability challenges. The condo sector, in particular, may see a period of reduced activity as developers focus on completions, potentially leading to a tighter market for new resale units in the medium term.

Mortgage holders and investors should monitor the pace of price adjustments, as modest gains suggest a stable but slow-moving market. The divergence between regions means that investment returns and risk profiles will vary significantly by location, with Ontario and BC facing more headwinds than the Prairies or Quebec. Liquidity in the new construction market may decrease as fewer projects break ground, affecting related industries such as real estate services and financing.

Builder / Developer Perspective

Developers in Ontario and British Columbia are likely to face continued pressure to prioritize finishing existing projects over starting new ones, given the expected decline in demand and economic caution. The forecasted drop in starts to near two-decade lows in Ontario suggests a significant contraction in new project pipelines. Financing and pre-sale requirements may become more stringent as lenders and buyers remain cautious. In contrast, developers in the Prairies and Quebec may find more favorable conditions, with construction remaining above historical averages, allowing for continued activity and potentially lower competition for labor and materials.

BurnabyHouse Insight

The CMHC’s 2026 forecast underscores a pivotal shift in Canada’s housing dynamics: the end of the construction boom and the beginning of a cautious adjustment phase. For Burnaby and Greater Vancouver, this means a period of reduced new supply growth, which historically supports price stability but limits choice for buyers. The divergence between regions highlights that national narratives often obscure local realities; while Ontario and BC face deeper corrections, other regions maintain strength. Investors and buyers should focus on regional specifics rather than national averages, as the recovery trajectory will vary significantly. The emphasis on finishing existing projects over new starts suggests a market in transition, where patience and localized knowledge are key to navigating the next cycle.