Posthaste: CIBC warns Canada’s housing market is in rougher shape than we thought

Canada’s housing correction drags on, data showed us yesterday, but with the sector representing a bigger chunk of our GDP than most other G7 countries, what does that mean for the economy?

CIBC economists Benjamin Tal and Katherine Judge looked at this question in a report out yesterday, and concluded that not only is the economic impact “not trivial,” the damage is deeper than some officials statistics would suggest.

Housing starts in Canada on the surface appear remarkably resilient, advancing five per cent in 2025 from the year before, according to data from the

Canada Mortgage and Housing Corporation . But CIBC says the reality is much weaker. Since the CMHC measures housing starts only when the foundation is poured, the start, especially in large multi-family buildings, is only being recorded one to two years after a project has begun.

“Simply put, today’s high rise housing starts statistics inform us about activity in late 2024, and not about the here and now,” said Tal and Judge.

Drawing information from Urbanation and Zonda, CIBC estimates that the real level of housing starts in the Greater Toronto Area and Greater Vancouver Area are 50 and 30 per cent lower, respectively, than official statistics suggest.

“And given the early signs of softness in other parts of the country, the gap between real and headline housing starts statistics is likely to grow,” they said.

Another casualty of the housing correction involves the wealth effect — the concept that when your assets rise in value you feel richer and buy more. When your assets lose value, you spend less.

It’s something that’s difficult to quantify, said the economists, though many have tried, including the

Bank of Canada , which in one study estimated that for every dollar increase in home values, spending rose by 5.7 per cent.

Another New Zealand study found that the housing wealth effect had even more sway when home prices were falling than rising, suggesting Canadians are likely to keep an even tighter grip on their wallets.

But the surge in home prices in Canada earlier this decade didn’t just give homeowners a psychological boost, it allowed them to borrow more against the value of their homes. Now with prices falling and loan-to-value ratios rising, more Canadians are finding it difficult to tap into that home equity.

The decline in homebuilding and falling home prices have “clear negative” implications for the economy, said CIBC — and it’s likely to get worse before it gets better.

“The economics of homebuilding, mainly in the high-rise space, is simply broken,” with prices “still too high to buy and not high enough to build.”

Until the country can figure out a way to reduce “the unsustainably high cost of homebuilding,” things will only get worse, not only for the housing market, but for the economy, they said.

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So much for the trade war. Global goods trade surged 4.5 per cent in 2025, its highest rate since 2011, except for the pandemic rebound in 2021, said Capital Economics.

That has trade growth outstripping global GDP by the widest margin in 20 years.

No prizes for guessing the trade leader. China’s share of global goods exports hit 18 per cent in 2025 in real terms, after surging in 2023 and 2024. Exports were down in the United Kingdom and little changed in other developed markets.

Capital is calling for consensus-beating growth of 2.5 per cent this year.

Their bottom line: “U.S. tariffs are causing world trade to shift, not shrink.”

• Today’s Data: Canada international merchandise trade, United States trade balance, pending home sales
• Earnings: Gildan Activewear Inc., Canadian Tire Corp., Teck Resources Ltd., Cenovus Energy Inc., Centerra Gold Inc., Eldorado Gold Corp. New Gold Inc., Taskeko Mines Ltd., First Majestic Silver Corp., Altus Group Ltd.

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Colin and Marcella, two empty nesters ready to retire in Halifax, are aiming for a target income of between $140,000 and $150,000. They have built an investment portfolio of $2.75 million, but don’t have defined benefit pensions. With RRSPs, TFSAs and other savings, they wonder when to apply for CPP and OAS to avoid any clawback.

Family Finance has some advice. Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on  one of the country’s most important sectors.

McLister on mortgages

Sign up here. 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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