Value of residential construction

Residential construction value is projected to reach $160.3 billion in 2025, representing modest growth of 1.2% over the previous year following several years of contraction. This stabilization reflects the early impacts of Bank of Canada interest rate cuts that began in mid-2024, with reduced borrowing costs unlocking pent-up housing demand and improving project economics for developers. Investment in residential building construction reached $16.0 billion in August 2025, edging up from the previous month as multi-unit and single-family projects showed signs of renewed activity.

Housing starts have demonstrated surprising strength in recent months, providing support for construction investment levels. Starts jumped 14% month-over-month in September 2025 to reach a seasonally adjusted annual rate of 279,234 units, the highest pace since 2022, driven by surges in Toronto and Montreal where multi-unit construction more than doubled year-over-year. The trend measure—a six-month moving average—advanced 4.1% to 277,147 units, with year-to-date starts through September reaching 178,033 units, up 5% from the same period in 2024. This momentum reflects developers responding to improved market conditions by launching projects that had been delayed during the high interest rate period.

The past five years have witnessed extreme volatility in residential construction, characterized by a pandemic boom followed by a sharp contraction. Construction value increased modestly by 2.8% in 2020 to $170.4 billion as initial pandemic disruptions were offset by strong housing demand and government stimulus. Activity exploded in 2021, surging 14.0% to reach an all-time record of $194.2 billion as historically low interest rates, remote work trends driving housing preferences, and massive household savings fueled unprecedented demand. This boom proved unsustainable once the Bank of Canada began its aggressive tightening cycle, with construction value plunging 10.5% in 2022 to $173.9 billion as rising mortgage rates killed affordability and froze markets.

The contraction accelerated in 2023, with construction value falling another 8.3% to $159.4 billion as interest rates reached their highest levels in decades and new housing investment collapsed. Activity remained depressed in 2024, declining a further 0.6% to $158.4 billion, leaving residential construction 17.5% below the 2021 peak and 3.3% below pre-pandemic 2019 levels. Toronto has been particularly hard hit, with 2025 on pace to record the lowest housing starts in three decades as condominium pre-construction sales collapsed and developers cancelled or delayed projects facing cost overruns, high development charges, and time-consuming approval processes. Vancouver similarly saw construction activity remain depressed, though Prairie cities including Calgary and Edmonton bucked the national trend with record-high starts supported by strong interprovincial migration and relatively affordable housing prices.