The Bank of Canada’s new forecast says housing will subtract 0.1 percentage points from Canada’s GDP growth this year, a sharp reversal from January, when the central bank expected the sector to add 0.2 points. The shift is less a statistical quirk than a blunt read on what’s happening in the market: demand is soft, supply is heavy, and builders are starting to blink.
The slowdown is concentrated in the places that once kept the condo market humming. Toronto preconstruction sales are at their lowest level in more than three decades, March home sales were 20% below the 10-year average, and new housing starts fell 2.9% in the six months through March. Developers have canceled or delayed dozens of projects, which means less new construction is coming behind the current slump.
- Urbanation says there were 4,295 newly completed condo units unsold in Toronto and Hamilton in the first quarter, a record.
- Investors, once a huge share of Toronto preconstruction condo demand, have largely stepped back as prices stopped rising and carrying costs stayed high.
- Ontario and federal rebate plans may clear some inventory, but the Bank of Canada still expects residential investment to stay subdued for two years.
- The central bank is also assuming oil falls to $75 a barrel by mid-2027; if energy prices stay elevated, rate policy gets harder, not easier.
That puts developers, condo buyers, and mortgage borrowers in the same tightening squeeze. The Bank of Canada is warning that higher oil prices could force it to raise rates again, while the housing market is already dealing with weak demand and a growing overhang of small units in major cities. The next clean read comes with the central bank’s inflation data, which it expects to peak in April around 3%.
