The Canada Mortgage and Housing Corporation (CMHC) reported that the annual pace of housing starts in Canada declined in May 2026 compared to April, signaling a potential cooling in the housing market. The seasonally adjusted annual rate of housing starts fell to 245,000 units in May, down from 260,000 units in April, according to data released by the federal housing agency.
Key Findings
The decline was driven primarily by a drop in multi-unit starts, such as condominiums and apartments, which decreased by 8% month-over-month. Single-detached home starts also saw a modest decline of 3%. Urban housing starts fell across most major cities, including Toronto, Vancouver, and Montreal, while rural areas remained relatively stable.
Regional Breakdown
Ontario experienced the largest drop, with housing starts falling by 12% compared to April. British Columbia and Quebec also saw declines of 7% and 5%, respectively. In contrast, Prairie provinces like Alberta and Saskatchewan recorded slight increases, attributed to ongoing demand in energy-sector hubs.
CMHC chief economist Bob Dugan noted that higher borrowing costs and persistent construction material shortages are weighing on builder sentiment. "While demand for housing remains strong, developers are facing headwinds from elevated interest rates and supply chain issues," Dugan said in a statement.
Market Context
The report comes as the Bank of Canada maintains its benchmark interest rate at 4.75%, following a series of hikes aimed at curbing inflation. Mortgage rates have risen accordingly, reducing affordability for many buyers. Meanwhile, the federal government has introduced measures to boost housing supply, including tax incentives for rental construction and streamlined zoning approvals.
Despite the monthly decline, housing starts in May 2026 were still 10% higher than the same month last year, reflecting long-term population growth and immigration trends. However, analysts caution that further rate hikes could dampen construction activity in the coming months.
Outlook
Industry experts expect housing starts to stabilize in the second half of 2026, as builders adjust to higher costs and demand moderates. The CMHC will release its next housing market outlook in July, providing a more detailed forecast for the remainder of the year.
