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The Canadian housing market has pivoted sharply from shortage to surplus, driven by falling home starts even as housing permits have surged to record highs. In August, residential permits reached nearly 350,000 units, yet housing starts dropped to ~245,800—a 16% fall from July. This disconnect suggests that regulatory delays (“red tape”) are not the main bottleneck in getting housing built.

At the same time, inventory of finished but unsold homes—especially in the multi-family sector—is at a generational high. There are nearly 12,000 such units listed in August, about 50% above the long-term average. Historically, many units were purchased during pre-construction, but now developers are stuck holding completed homes with few buyers.

Pre-construction demand has collapsed (e.g. in Toronto), and resale inventory is swelling. At the same time, rising input/construction costs are preventing price drops, even though demand has weakened. Policymakers who continue to push housing stimulus or say the problem is a shortage may need to confront whether the market can realistically absorb the current glut.

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