Housing starts in Canada are the strongest in four years — with one big exemption.

Homebuilding in Canada averaged 250,000 annualized units in the first half of the year, exceeding the average 201,000 units in the 10 years before the pandemic.

But it’s a different story in Ontario, where housing starts, particularly in the Greater Toronto Area, “seriously” lag the rest of the country — a situation that economists say could have “dire consequences” a few years from now.

The province’s six-month average has fallen to the lowest level in a decade,

said Robert Hogue , assistant chief economist at Royal Bank of Canada.  “This divergence is concerning, because it threatens to perpetuate severe affordability problems that exert social and economic hardship on Canadians in these regions,” he said.

There are a couple of reasons why this has come to pass. Inventory in existing homes has grown more in Ontario than other provinces, which has cooled demand for new homes, said Hogue.

The Greater Toronto Area is still absorbing the boom of condo units completed during 2024 that were started during the pandemic. And investor interest in pre-construction condos has nearly collapsed, he said.

Meanwhile, Ontario construction costs have grown the most in Canada as land, labour and materials, along with municipal fees, rose rapidly in price.

One sign of trouble is that Ontario municipalities are issuing more

building permits than builders are acting on. “This suggests a major bottleneck in projects are costs instead of permit approvals,” he said.

Since large multi-unit projects can take two to three or more years to complete,  a slump today threatens future supply.

“Any material drop in completions causing a slowdown in the housing stock’s expansion would make it that much harder to close the province’s housing supply gap,” said Hogue.

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Retail sales jumped 1.5 per cent in June, then slumped 0.8 per cent in July, according to an early estimate by Statistics Canada.

The June reading put sales for the second quarter up just 0.4 per cent, a big step down from the 1.1 per cent increase in the first three months of year.

“In all, recent soft labour market data, the subdued retail picture for July, and well-contained inflation suggest that the Bank of Canada could resume cutting interest rates at its September meeting,” said Florence Jean-Jacobs, principal economist at Desjardins Group.

  • Canada’s big banks will report their third-quarter results this week. Bank of Montreal and Bank of Nova Scotia report their results on Tuesday, followed by Royal Bank of Canada and National Bank on Wednesday. CIBC and TD Bank Group report on Thursday.
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In recent years, Canada Revenue Agency has also been cracking down on perceived abuse of the principal residence exemption even when properties are held for more than a year. Tax expert Jamie Golombek explains the case where a Toronto taxpayer was penalized for failing to report a capital gain of $159,282 on the sale of residential real estate. To make matters worse, he was also hit with a $21,000 gross negligence penalty.

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).

McLister on mortgages

Read more Want to learn more about mortgages? Mortgage strategist Robert McLister’s

Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

Financial Post on YouTube

mortgage rate page for Canada’s lowest national mortgage rates, updated daily. Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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