This year’s back-to-school shopping season shows how consumers adapt spending when costs are uncertain. That same shift is emerging in Canada’s housing market.
July sales data—combined with federal support for building materials, the prospect of lower interest rates and steady hiring—all suggest that “back-to-house” season is starting early.
Major takeaway
Both retail and housing markets show that when uncertainty looms, consumers shift their timelines forward, focus on essentials and seek maximum value.
The stage is set for a stronger fall housing market with demand building, more targeted government support for building materials, likely rate cuts and steady employment gains.
The real unlock will come from tackling cost barriers, primarily the steep development charges.
Early movers
Back-to-school shoppers bought early this year to potentially sidestep tariff-driven price hikes and avoid stock shortages.
Canadian homebuyers are taking the same approach.
Many are entering the market ahead of the Bank of Canada’s expected two rate cuts in the second half of 2025, which should reduce borrowing costs and support further job growth. Strong private-sector hiring is expected to bring down unemployment, adding to buyer confidence.
July home sales climbed 3.8 per cent month over month, with the Greater Toronto Area up 35.5 per cent since March, signalling that many are acting now to secure value before competition intensifies.
Policy support and cost relief
Federal action on materials and potential tariff reductions could give builders some breathing room.
Prime Minister Mark Carney’s $1.2 billion aid package for the softwood lumber industry, coupled with openness to removing certain U.S. tariffs, could ease input costs. With 4.4 months of inventory nationally, below the long-term average of five, any cost relief could help bring more units to market.
The biggest obstacle remains high development charges, which in some regions have climbed to levels exceeding the cost of building an entire home a decade ago. For municipalities serious about unlocking supply, there is still plenty of metaphorical “wood to chop” in reducing these fees.
Livability over luxury
House hunters are prioritizing space, location and long-term value over luxury.
The national MLS Home Price Index was flat in July from the prior month and down 3.4 per cent year-over-year, the smallest annual drop since early 2024. The national average sale price rose 0.6 per cent from a year earlier to $672,784, suggesting price stability is returning.
Developers who match projects to these buyer priorities will be better positioned to accelerate starts into 2026.
Housing starts in flux
Nationally, the trend in housing starts rose 3.7 per cent to 263,088 units in July, according to Canada Mortgage and Housing Corp., reflecting a steady increase in construction momentum. Yet, regional divergence continues to take shape.
High development costs continue to choke supply in Toronto, where housing starts plunged 69 per cent in July from a year earlier and are down 49 per cent. Without policy reform, the downward spiral is likely to continue.
Montreal leads with a 212 per cent surge, powered by multiunit projects. Quebec’s ability to protect renters while still incentivizing construction makes it the standout, as noted in the CMHC report.
With no rent control capping returns, Alberta has become a magnet for investors and the 49,000 new residents arriving this year. Edmonton rose 36 per cent on that momentum, while Calgary is demonstrating the strength of free-market dynamics, with starts up 22 per cent year-to-date but easing 24 per cent in July compared with July last year as oversupply brings rents back into check.
Developers in Vancouver are likely to pull back. Starts rose 24 per cent in July versus a year earlier, but vacancies are climbing, with top-tier rates already at 12.2 per cent, and slower population growth is tempering demand. Indigenous partnerships will help sustain momentum, as they are key to unlocking housing in the region by bypassing municipal bottlenecks, accelerating approvals and delivering large-scale rental projects.
