Canada’s construction pulse: Permits lead, starts confirm

Housing starts are a key measure of residential construction in Canada. There’s a reason for this: it’s only at the housing start stage that we can have confidence that the building will indeed be residential. Before that stage, construction can be halted or a building can be repurposed.

Residential construction is a continuum of activities, and housing starts now occur relatively late in this process. In this context, it is critical to map out the milestones of housing construction to understand when each step happens and what it means in terms of project maturity.

To understand market conditions in an environment dominated by large multi-year housing developments, earlier indicators like building permits give us a good sense of the current market sentiment and of what to expect for housing construction in the future. For Canada’s major cities, it points towards further decline in housing construction for 2026 and beyond.

Building a multi-unit is a multi-year, multi-phase process

Delivering a large apartment building can take years through a continuum of activities. The design and development phase includes developing all the plans, documents and studies needed to move to the review, permitting and approval phase. This typically leads to land use and planning approvals – the very first stage of approval by the municipality. At this stage, the developer works with the municipality to do a zoning review and to approve the site plan.

The design, development and site approval stage also leads to the financing of a project. A condominium project in Canada generally needs to be pre-sold at 70% before it can secure financing from a bank. This rule of thumb varies in more competitive financing environments where lenders may agree to finance a project with a lower share of pre-sold units. For purpose-built rental projects, lenders and insurers would typically require a building permit before financing or insuring a project.

Once the financing is acquired for a condominium project, a developer would apply for building permits from the municipality. However, there are several permit types depending on the municipality. For example, building permits are different from development or excavation permits, and they occur at a later stage. In some municipalities, there are also permits required after the acquisition of a building permit.

At the moment, comprehensive zoning and land use reviews, as well as sales and pre-sales data, are not readily available in Canada. These would be the earliest possible indicators of current market conditions, since the length of project design and development vary significantly.

We are currently working with industry to enhance coverage and improve the accuracy of sales and absorption data collected through CMHC’s Starts and Completions and Market Absorption Surveys. This should also help with tracking timelines from sales to start and completion of large-scale apartment projects. For the time being, in the absence of sales or financing data, the earliest widely available indicators are building permits.

The shift in the make up of housing starts should change how we use data

Until 2012, most housing construction in Canada was single-detached housing. From 2012 to 2025, condominiums made up most housing starts across the country. Since last year, purpose-built rental apartments are now the largest single category of housing starts.

This matters when analyzing housing data. Pre-2012 housing starts may have been a good indicator of market conditions at the time, because the delays between housing permits and starts are much shorter for single-detached housing. Now, building permits are a better indicator of current market conditions, and housing starts are a better indicator of residential construction activity and upcoming completions.

This is because condos and rental apartments in most large urban centres come as mid- to high-rise structures. High-rise structures show a longer delay between the acquisition of a building permit and the housing start (roughly 9 to 15 months) relative to single-detached houses (roughly 2-10 months). These delays also vary greatly across major urban centres.

Examining historical trends, we have observed an increase in the average delay between building permits and housing starts. This can at least partly be explained by a change in the composition of housing starts – high-rise buildings often require heavier foundational work (like shared podium structures across multiple towers) and often include one or more underground parkades that take longer to build.

Other factors may also come into play, including temporary capacity constraints like labour shortages and regulation as well as the state of the economy. Finally, market conditions also play a role in this delay – developers may pause a project while they wait for more favourable circumstances.

The composition of total housing starts in various municipalities is also important to consider when trying to put a finger on the market’s pulse. This composition varies significantly and may impact the speed of housing starts across municipalities. In Toronto and Montréal, more than half of housing starts are high- or mid-rise, while in Calgary the vast majority are either single-detached houses, gentle density housing (row/townhouses) or low-rise structures below 7 storeys.

What building permits tell us about future construction activity

Focusing on apartments, which make up most housing starts, we notice that building permits generally lead housing starts by about 6 to 15 months. Building permits hence provide valuable information on the current pulse of the market as well as future housing starts momentum.

Figures 3 to 6 show building permits and housing starts for the four major cities under review, as well as the associated census metropolitan areas (CMAs). They show a loss of momentum across all major markets, with the number of building permits slowing or stabilizing in Calgary and Montréal, even where housing starts show sustained momentum.

The difference in the trends for building permits and housing starts in these markets support expectations of slower housing construction in the near future. In Toronto, housing starts are already showing signs of slowing down, in line with building permits issued in the recent past. In the Greater Toronto Area, building permits show some momentum relative to the city.

In Vancouver, both building permits and housing starts show signs of stabilization. It is worth noting that monthly housing data is notoriously volatile.

Bottom line: the right data for the right purpose

When markets change momentum, industry players inevitably look for as much information as possible to guide their decision-making. This is what CMHC’s knowledge and expertise are for in the housing market.

While housing starts have been a flagship measure of residential construction activity for decades – one that feeds into our national estimation of GDP and other key macroeconomic statistics – they are better used to measure the extent of housing construction activity. To have a pulse on housing market sentiment in the absence of widely available data on zoning applications or sales, building permits remain a good indicator. Building permits are also a good directional predictor of housing construction. In terms of market intelligence, CMHC also releases its Rental Development Survey annually, reflecting rental industry sentiment broken down regionally.

A thorough analysis of trends in building permits and housing starts tells us there is softness in housing markets across the country – sentiment is trending down and so should building activity in the near future.

Contributors to this article: Vinay Bhardwaj, Ian Moore, Jens von Bergmann, Shima-Shohreh Tavassoli, Zixuan Zhang