Multi-family homebuilder sentiment in Canada has hit its lowest level since early 2021, says a new Canadian Home Builders’ Association report.

Meanwhile, single-family homebuilders also hold a pessimistic view.

The report is based on the CHBA’s fourth quarter 2024 housing market index HMI, which reflects worsening selling conditions in Ontario and British Columbia, with other regions also seeing a decline. The outlook for the near future remains weak.

The CHBA’s HMI, a key indicator of future housing starts, suggests that construction activity will remain subdued, worsening Canada’s ongoing housing supply and affordability challenges. The single-family HMI dropped by 2.5 points from the previous quarter to 25.1, just 0.5 points away from its record low. Meanwhile, the multi-family HMI plunged 6.5 points to a record low of 22, which is four points lower than the previous low set in late 2022.

Ontario and B.C. Hit Hardest

Home sales and builder sentiment are significantly stronger in regions where homeownership remains more affordable. However, Ontario and B.C. are experiencing particularly dire conditions. Ontario’s multi-family HMI plummeted to 6.2, and B.C.’s single-family HMI is “alarmingly” low at 10.5.

In the Prairies region, sentiment remains neutral, but the multi-family HMI fell more than 10 points from the previous quarter. The single-family HMI in Atlantic Canada also declined for the second consecutive quarter, standing six points lower than a year ago.

Rising Costs and Regulatory Hurdles

When asked about their biggest business challenges in 2025, 19% of builders cited high construction costs. Municipal taxes and lengthy approval timelines continue to push home prices higher.

Despite the Bank of Canada’s fifth-consecutive rate cut in December, mortgage interest rates have not dropped as quickly, says the CHBA. About one-third of builders indicated that further rate reductions would be necessary to improve their sales outlook.

Additionally, ongoing political and U.S. tariff uncertainty is compounding the challenges facing the housing market. Builders reported that non-lumber material costs have increased by $36,000 for a 2,400-square-foot home since late 2023, while softwood lumber prices have risen by 10-18% over the past year.

CEO Calls for Policy Action

Kevin Lee CEO of the Ottawa-based CHBA, said policy changes are urgently needed to support the homebuilding industry.

“Although the federal government has correctly recognized that we are in a housing crisis and we need to double home construction starts in order to correct the supply shortage and help improve housing affordability, conditions have not enabled homebuilders to ramp up,” said Lee.

“Builders across the country are keen to build, but with no buyers, and with increasing costs of construction, including development taxes, they simply cannot build.”

Lee also pointed to a stark drop in housing starts.

“Sadly, the majority of HMI respondents reported that they had fewer housing starts in 2024 than they did in 2023 – a reduction of 50% on average, reflecting the drops we are seeing in builds for homeownership,” he said.

“Interest rates need to keep coming down and be reflected in mortgage rates, and the stress test needs to be more fluid. Importantly, government policy at all levels should focus on decreasing taxes on new homes, reining in runaway development charges, and eliminating costly lags in development approvals.”

As homebuilders continue to grapple with economic and regulatory challenges, the CHBA’s latest findings signal that housing affordability and supply issues are likely to persist in the near term.

The Canada Mortgage and Housing Corporation has forecast declines in multi-family housing starts and rents in 2025.

Photo: CHBA