CMHC's homebuilding forecast marks the end of population-driven demand assumptions
CMHC's homebuilding forecast marks the end of population-driven demand assumptions
A 47-unit condo tower in Mississauga sat 62% unsold in November 2025, nine months after its sales centre opened. The developer, who had budgeted on an 80% pre-sale threshold to secure construction financing, postponed the groundbreaking indefinitely. That project is now one of thousands across the Greater Toronto Area stalled at the planning stage, waiting for a market that may not return in the shape builders expect.
Canada Mortgage and Housing Corporation's latest forecast projects a multi-year decline in housing starts through 2028, driven not by zoning battles or municipal foot-dragging but by forces developers cannot lobby away: unsold inventory, higher borrowing costs that refuse to normalize on the timeline anyone predicted, and a sharp deceleration in population growth after two years of record immigration. The agency's numbers suggest the 3.5 million additional units needed by 2030 to restore affordability will not be built at anywhere near the required pace, but the reason is structural, not regulatory.
The inventory problem has replaced the supply problem
For a decade, Canadian housing policy operated on a single assumption: build more and someone will buy it. Population growth ran ahead of construction starts every year from 2016 through 2024, creating a persistent shortage that pushed prices upward regardless of economic conditions. Builders responded by increasing the pipeline of pre-construction condos, particularly in Toronto and Vancouver, betting that demand was effectively infinite.
That bet soured in 2025. Unsold pre-construction inventory in the GTA exceeded 10-year averages by late in the year, a reversal that caught developers holding land they had acquired at peak valuations. The issue is not that units are sitting empty after completion, they have not been built yet. The issue is that the financing model for Canadian condos requires 70-80% of units sold before construction begins, and investor appetite, which had propped up pre-sales for years, evaporated when interest rates stayed high and rental yields compressed.
CMHC's forecast acknowledges this dynamic explicitly. The downturn is not a pause while supply catches up to demand. It is a market adjustment to an oversupply of planned units that cannot be sold under current conditions.
Trade policy is now a housing variable
The cost structure of homebuilding changed in 2025, and it changed because of decisions made in Washington. Tariffs on softwood lumber, which had fluctuated for years, spiked again as part of broader trade tensions between the U.S. and Canada. Steel imports faced similar volatility. For a Canadian builder, these are not abstract macroeconomic headwinds, they show up as a 12-18% increase in the hard cost of framing a mid-rise building.
Developers cannot pass those costs through to buyers when the market for pre-construction condos has already softened. The result is projects that were marginally viable at 2023 input costs becoming unviable in 2026, even as municipal governments continue approving them in theory. The federal government's removal of GST on new rental construction has helped at the margins, but it does not offset a tariff-driven cost spike that affects every trade.
The new demographic ceiling
Federal immigration targets for 2026 and 2027 show a deliberate reduction in non-permanent residents, international students and temporary workers, compared to the 2023-2024 peak. Population growth will remain positive, but the trajectory has shifted from exponential to moderate. For builders who modeled future demand on the assumption that Canada would add 500,000+ net new residents annually for the foreseeable future, that shift removes the floor.
The irony is sharp: the supply deficit remains enormous, likely worse than official estimates. But the market mechanism that was supposed to close it, private construction financed by investor pre-sales, has stopped functioning because the investors themselves have disappeared. CMHC's forecast is not predicting a supply glut. It is predicting a standoff where the gap persists because the economics of closing it no longer work.
What replaces population-driven demand assumptions is less clear. Builders are pivoting toward purpose-built rentals where financing exists, but those projects face tighter margins than luxury condos and require patient capital most developers do not have. The 2028 timeline CMHC projects may turn out to be optimistic if the variables, rates, trade, immigration policy, do not move in the same direction.
CMHC's homebuilding forecast marks the end of population-driven demand assumptions
A 47-unit condo tower in Mississauga sat 62% unsold in November 2025, nine months after its sales centre opened. The developer, who had budgeted on an 80% pre-sale threshold to secure construction financing, postponed the groundbreaking indefinitely. That project is now one of thousands across the Greater Toronto Area stalled at the planning stage, waiting for a market that may not return in the shape builders expect.
Canada Mortgage and Housing Corporation's latest forecast projects a multi-year decline in housing starts through 2028, driven not by zoning battles or municipal foot-dragging but by forces developers cannot lobby away: unsold inventory, higher borrowing costs that refuse to normalize on the timeline anyone predicted, and a sharp deceleration in population growth after two years of record immigration. The agency's numbers suggest the 3.5 million additional units needed by 2030 to restore affordability will not be built at anywhere near the required pace, but the reason is structural, not regulatory.
The inventory problem has replaced the supply problem
For a decade, Canadian housing policy operated on a single assumption: build more and someone will buy it. Population growth ran ahead of construction starts every year from 2016 through 2024, creating a persistent shortage that pushed prices upward regardless of economic conditions. Builders responded by increasing the pipeline of pre-construction condos, particularly in Toronto and Vancouver, betting that demand was effectively infinite.
That bet soured in 2025. Unsold pre-construction inventory in the GTA exceeded 10-year averages by late in the year, a reversal that caught developers holding land they had acquired at peak valuations. The issue is not that units are sitting empty after completion, they have not been built yet. The issue is that the financing model for Canadian condos requires 70-80% of units sold before construction begins, and investor appetite, which had propped up pre-sales for years, evaporated when interest rates stayed high and rental yields compressed.
CMHC's forecast acknowledges this dynamic explicitly. The downturn is not a pause while supply catches up to demand. It is a market adjustment to an oversupply of planned units that cannot be sold under current conditions.
Trade policy is now a housing variable
The cost structure of homebuilding changed in 2025, and it changed because of decisions made in Washington. Tariffs on softwood lumber, which had fluctuated for years, spiked again as part of broader trade tensions between the U.S. and Canada. Steel imports faced similar volatility. For a Canadian builder, these are not abstract macroeconomic headwinds, they show up as a 12-18% increase in the hard cost of framing a mid-rise building.
Developers cannot pass those costs through to buyers when the market for pre-construction condos has already softened. The result is projects that were marginally viable at 2023 input costs becoming unviable in 2026, even as municipal governments continue approving them in theory. The federal government's removal of GST on new rental construction has helped at the margins, but it does not offset a tariff-driven cost spike that affects every trade.
The new demographic ceiling
Federal immigration targets for 2026 and 2027 show a deliberate reduction in non-permanent residents, international students and temporary workers, compared to the 2023-2024 peak. Population growth will remain positive, but the trajectory has shifted from exponential to moderate. For builders who modeled future demand on the assumption that Canada would add 500,000+ net new residents annually for the foreseeable future, that shift removes the floor.
The irony is sharp: the supply deficit remains enormous, likely worse than official estimates. But the market mechanism that was supposed to close it, private construction financed by investor pre-sales, has stopped functioning because the investors themselves have disappeared. CMHC's forecast is not predicting a supply glut. It is predicting a standoff where the gap persists because the economics of closing it no longer work.
What replaces population-driven demand assumptions is less clear. Builders are pivoting toward purpose-built rentals where financing exists, but those projects face tighter margins than luxury condos and require patient capital most developers do not have. The 2028 timeline CMHC projects may turn out to be optimistic if the variables, rates, trade, immigration policy, do not move in the same direction.
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