Dear Valued Subscriber

📌 In this issue you’ll get:

• What’s driving construction cost increases and supply-chain disruptions

• What recent data shows for Ontario and the GTA housing pipeline

• The knock-on effects for supply, affordability, and home prices

• What this means for buyers, sellers, and investors now

• RealEdge takeaways & what to watch heading into 2026

Why construction & supply-chain pressures are building

• Rising building costs — According to the latest national data, residential building construction costs rose 0.6% in the third quarter of 2025 (on top of earlier increases), bringing the year-over-year construction-cost jump to around 3.3% in major CMAs. Structural steel, metal fabrication and other key inputs appear to be some of the biggest contributors. Statistics Canada

• Materials & tariffs pressures — Tariffs, rising metal prices, global supply-chain friction, and rising transport costs continue to push up material prices across Canada. Builders report longer lead times and increased expenses for essential materials such as steel and concrete. Mortgage Rates & Broker News

• Labour and wage pressure — A shortage of skilled trades, combined with higher wages to attract labour, is pushing up the overall cost structure for new builds.

• Developer caution & shifting priorities — Because rising costs squeeze profitability, many developers are scaling back or delaying projects — especially riskier ones such as high-rise condos. Some are pivoting toward rental projects or more modest scale ground-oriented housing instead. Canada Mortgage and Housing Corporation+2Storeys+2

What recent data shows: Ontario & GTA housing pipeline under stress

• Nationwide, the latest housing-supply report shows housing starts in many of Canada’s largest CMAs held steady in early 2025 — but Ontario (including Toronto) saw one of the steepest slowdowns. Canada Mortgage and Housing Corporation

• Specifically, Ontario saw a contraction in housing starts a drop of 38% from the previous year, according to a recent home-builder confidence index reflecting weakened momentum on new home construction. Canadian Home Builders' Association

• Even though rental apartment and ground-oriented housing starts are holding up somewhat in other provinces, the slowdown in Ontario particularly in multi-unit developments (e.g. condos) suggests fewer new units will hit the market over the next 1–3 years. Canada Mortgage and Housing Corporation

• This comes as demand remains elevated, especially in urban and suburban corridors. The gap between demand and new supply threatens to widen further.

What this means: Supply Crunch, Affordability Pressure & Price Support

Supply crunch ahead

With fewer starts, delayed projects, and cautious developer sentiment — especially in high-cost, labour/material-sensitive markets — fewer new homes are likely to be completed in Ontario/GTA over the next few years.

Because of this, even moderate demand could stretch supply tight. In markets where price growth already slowed, limited supply could prevent further declines — or even stabilize prices.

Affordability challenge persists

• Higher construction costs get baked into final sale prices. That means new builds will likely remain expensive, pricing out many first-time and moderate-income buyers.

• For rental stock: slower supply growth constrains new rental unit delivery which may keep rent and vacancy pressure elevated, making it harder for renters to find new, affordable units.

Support for value of existing homes

With new supply constrained, older and existing homes, especially well-located ones, may maintain or even increase value. Buyers/investors may shift focus from new-builds to resale and renovation opportunities.

What this means for You Buyers, Sellers & Investors

For Buyers:

• Don’t count on a flood of affordable new housing hitting soon in Ontario/GTA. If you need to buy in the next 12–24 months, resale homes or ready-to-live properties may offer more realistic options than pre-construction/new-builds.

• Be cautious about new-build premiums: with higher construction costs, new homes may come with high price tags — ensure you’re comfortable with long-term cost and value, not just short-term novelty.

For Sellers (especially in older or well-maintained homes):

• You may be sitting on more value than you expect — limited new supply and rising component costs could help support or even increase resale values in the coming years.

• Emphasize features that are attractive in a tight-supply market: proximity to transit, good upkeep, energy efficiency, and overall livability.

For Investors:

• Rental demand may stay strong as supply of new units shrinks — existing rental properties could see stable or rising rents and lower vacancy rates.

• “Value-add” plays — properties that can be upgraded, renovated, or repositioned — could outperform new-builds, particularly where cost inflation hits new developments hard.

• Consider geographic diversification: markets outside the high-cost Ontario core (where construction pressure is extreme) might offer better risk/return balance.

Bottom line

Rising construction costs, shifting supply-chain dynamics, and a cautious development pipeline are quietly reshaping housing supply in Ontario and the GTA. This matters not just for builders but for home-buyers, sellers, and investors. Supply may be tighter than many expect, which could support resale values and rents, but make affordability and new-build access more challenging.

Stay tuned: in our next issue we’ll explore which Ontario suburbs and secondary markets are best positioned to benefit from these supply pressures while offering relative affordability.

The RealEdge Team

See you next week