Canadian Homebuilding Costs Are Easing. Will Housing Affordability Improve?

A new report suggests some hard construction costs are on the decline in Canada, but the landscape remains challenging for homebuilders and new homebuyers.

By Josh Sherman | 3 minute read

Some trades are lowering labour pricing due to a lack of available work.

Towering increases to homebuilding costs in Canada are beginning to moderate, and while that could help push some projects toward the starting line, it won’t substantially improve housing supply or affordability.

So suggests one of the authors behind real estate advisory firm Altus Group’s 2025 Canadian Cost Guide, a comprehensive report examining line-by-line hard construction costs for thousands of developments across Canada since the start of 2024.

“Double-digit cost escalation eased off last year. Into this year we’re seeing competitive pricing and developers beating the estimates that they had last year,” Colin Doran, head of development advisory, North America, at Altus Group.

“But, at the same time,” he tells Wahi, “there’s all this uncertainty, where there’s tariffs, building-code revisions, labour-union-agreement negotiations, where there’s some concerns around strikes, and it’s really [a question of] what’s going to happen going forward.”

Costs did still increase in seven of the nine major markets tracked over the period spanning 2024 and the early part of this year, though less dramatically than from 2021 to the first months of 2023, when prices for certain building items surged by 40% annually. 

The Greater Toronto Area and Ottawa were the two markets that recorded declines, depending on the type of project. “The reason why we’re seeing less aggressive pricing is obviously because of less projects [going forward],” he continues. With not as much work to go around, some contractors have been lowering bids to generate business, Duran explains.  

For example, for a high-rise residential building between 40 and 60 storeys, the cost per square foot of construction ranged from $330 to $410 in the GTA, compared to $340 to $425 in the previous year’s report. In the seven markets that had projects of this scale, Calgary and Montreal had the lowest bottom-end costs at $310 per square foot, while Vancouver had the highest, starting from $360.

While certain developers with shovel-ready projects may benefit from moderating or falling hard costs — which include line items such as concrete formwork but exclude soft costs such as marketing and legal fees — it’s not enough to compensate for the overall challenging market conditions facing developers.

Developers in the GTA and Hamilton were able to sell just 533 new condos in the first quarter of this year, a 30-year low, according to real estate consultancy Urbanation. Investors initially fled the segment as interest rates began to rapidly rise in the post-pandemic period. While rates have been declining for the past year, economic uncertainty stemming from trade tensions with the U.S. has continued to spook investors. 

“Even with construction costs easing off, unfortunately it still doesn’t make projects viable to date,” Doran explains. “One we don’t have the demand, so we don’t have the revenue,” he says. “Two, even with construction costs easing off, we need something else to move the needle,” he adds.

Doran notes that many in the industry have called for lower levies on new developments. In several GTA markets, including Toronto, as well as Markham, Mississauga, Richmond Hill, and Vaughan, the average development charges levied by municipalities on high-rise developments amount to more than $100,000 per unit, according to the 2024 Greater Toronto Area Municipal Benchmarking Study. 

It’s unclear to what extent tariffs would affect construction costs, but there is the potential for considerable increases. “We get asked constantly on the impact of tariffs, and that’s a tough one,” Doran says.

He points to electrical and mechanical components, encompassing everything from appliances to heating and cooling elements. These items are typically imported and may undergo multiple border crossings before settling in Canada. Such items can account for 25 to 40% of a development’s cost. “I really don’t think we can even quote a percentage right now because, like anything, the devil is in the details. It’s specific to the project, it’s specific to the developer, to the supply chain,” he says. “No matter what happens… there’s going to be some impact.”