Canada’s Housing Developers Struggle Amid Economic and Trade Pressures

Canada’s Housing Developers Struggle Amid Economic and Trade Pressures

Canada: Housing developers in Canada are expected to face continued challenges throughout 2025, as macroeconomic uncertainty, affordability concerns, and rising trade tensions weigh on the sector, according to a recent analysis by Morningstar DBRS. Despite a persistent national housing shortage, total housing starts fell by 5% year-on-year in January and February 2025, as reported by the Canada Mortgage and Housing Corporation (CMHC). Although long-term fundamentals, including low supply and government growth targets, suggest future recovery, Morningstar DBRS anticipates subdued market activity for the remainder of the year. Developers are expected to maintain buyer incentives to support sales, placing further pressure on margins and credit profiles, particularly among smaller, less diversified firms. Insolvency filings among real estate developers rose from 36 to 68 in 2024, and the trend is expected to persist. 

A key concern highlighted in the report is the rising cost of construction due to increased tariffs on imports from the United States. Canada imports building materials such as glass (USD 2.6 billion), major appliances (USD 2.3 billion), hardware (USD 1.6 billion), and ceramic tiles (USD 0.74 billion) from the US. New or increased tariffs are likely to inflate these costs, making housing more expensive and complicating affordability for buyers. While government measures to reduce fees and taxes may offer some relief, their impact is expected to be delayed. Larger developers with greater financial resilience and local market advantages are better positioned to manage the current environment, though all builders are expected to proceed cautiously with future investments and projects. A potential market rebound is anticipated in 2026 or 2027, depending on the resolution of supply constraints and release of pent-up demand. 

Source: CMP