We are standing at the hinge of a cycle. The tide that once lifted all boats is ebbing; channels narrow, currents change. Pessimists diagnose; optimists build. The future will belong to those who read the new cycle clearly, and act.

1) The Thesis

Long term looks at population, mid term at land (and municipal finance), short term at finance.

• Population (long-term): Ottawa has moved from demand expansion to demand management. The 2025–2027 plan lowers overall inflows and caps temporary residents at ~5% of population, with official forecasts even showing a marginal population decline of ~0.2% in 2025–26 before modest growth resumes—explicitly to give housing supply room to catch up. (Canada.ca)

• Land & municipal finance (mid-term): The growth-era model—heavy reliance on development charges/land-driven revenue and perpetual greenfield/suburban expansion—has run into affordability ceilings, NIMBY friction, and high carrying costs. Big cities must pivot to redevelopment, densification, and revenue models not contingent on endless new land sales (more on fixes below).

• Finance (short-term): The Bank of Canada has shifted from emergency tightening to measured easing: the policy rate is down to 2.50% (Sept 17, 2025) after a series of cuts since late-2024. This improves carrying costs but with a lag, and against a slowing economy and softer labour market—the unemployment rate hit 6.7% in March and rose further in spring. (Bank of Canada)

Conclusion: The “big development” phase—broad price inflation, investor-led presales pipelines, cheap credit—is ending. We are entering a stock (inventory) era marked by divergence across markets and segments.

2) The Turning: From Broad Gains to Divergence

Developers’ math broke before demand disappeared. The GTA’s new-condo market shows the mechanism clearly:

• With investors stepping back (negative cash flow, higher rates), presales collapsed—<5,000 units in 2024 and still deteriorating into 2025—undermining construction financing that typically requires ~70% presales. Completions are projected to plunge from 30,000+ to <10,000 by 2028, implying a late-decade supply drought. (UrbanToronto)

• Data corroborate the freeze: Q1-2025 GTHA new-condo sales fell 88% below the 10-year average (lowest since 1995); only 533 units sold in the quarter. Q2 saw only 3 launches (891 units) and 502 sales. Unsold inventory across stages ~24,045 units in Q2, while completed-but-unsold stock swelled to records. (urbanation.ca)

Vancouver mirrors the pattern, with a different mix:

• Completed condos sitting vacant are expected to exceed 3,400 units by year-end 2025 (up sharply from 2,179 at end-2024)—a visible overhang in delivered, non-absorbed product. (Mortgage Professional Canada)

• The rental vacancy rate has climbed off historic lows (Vancouver 0.8% → 1.6% in 2024, highest in ~20 years outside pandemic)—relief at the margin, but not cure. (Vancouver)

Public frustration & industry blowback:

• Toronto analysis warns: “You pushed investors out; the pipeline is drying up; without an alternative financing model, we’re all worse off.” Policymakers should de-risk supply rather than vilify it. (UrbanToronto)

• In Vancouver, Wesgroup’s layoffs (12%) and its CEO’s public post captured the broader development funk—“last resort” amid economics that “left us no choice.” (BIV)

Net effect: Canada has not “fixed” demand so much as dislocated the development financing machine. The result is sharp divergence:

• Tier-one metros/prime submarkets (Vancouver West Side nodes, Toronto transit-rich cores) “trade price for volume” to find a bottom, clearing inventory and stabilizing.

• Peripheral or investor-dependent segments (certain outer-ring condos, luxury one-bed towers) face prolonged de-stocking, cancellations, or mothballing.

• Nationally, starts can spike month-to-month (e.g., +14% in Sept 2025 SAAR), but underlying condo starts and presales pipelines remain impaired, setting up late-decade scarcity. (Reuters)

  
  

3) 2025 Policy Direction: From “Fight Overheating” → “Prevent Over-Cooling”

• Monetary: BoC easing is real (2.50%), but growth is soft and labour markets looser; the recovery will be gradual, not a V-shaped snapback. (Bank of Canada)

• Population: Ottawa’s immigration reset (especially the cap on temporary residents and reduced targets) is deliberate demand management to relieve housing pressure in the near term—even at the cost of slower growth. (Canada.ca)

• Supply statecraft: Ottawa created Build Canada Homes (BCH), a new federal vehicle to finance, assemble land, approve portfolio deals, and directly spur builds—initial capitalization $13B with the goal of catalyzing ~500,000 homes/year via a whole-of-government approach. (Prime Minister of Canada)

• Reality check: Despite policy momentum, GTA condo sales at 30-year lows and record completed unsold in both GTA and Metro Vancouver show today’s bottleneck isn’t permits alone—it’s capital stack viability under today’s rents, costs, and rates. (urbanation.ca)

4) Where We Are, City-by-City

Vancouver

• Inventory overhang concentrated in completed condos and select submarkets; vacancy easing but affordability still stretched. Absorption relies on price realism, incentives, and de-risked take-out capital. (Mortgage Professional Canada)

• Expect “price-for-volume” bottoming in well-located, family-sized and rental-viable product; longer de-stocking for small investor-spec product far from frequent transit.

• Developer sentiment remains cautious, with visible retrenchment (layoffs, deferred launches). Late-decade supply squeeze risk is building if financing remains clogged. (BIV)

Toronto / GTHA

• Presales freeze is the main story: without investors fronting equity, towers don’t pencil, lenders won’t advance; completions cliff begins later in the decade. Policy rhetoric against “investors” without a substitute equity modelbackfires into future scarcity. (UrbanToronto)

• Selective resilience: projects with strong end-user fundamentals (transit, schools, livable layouts) can clear via price discipline and incentives; luxury/spec towers will lag.

  
  

5) Learnings → Directions

These facts mark the end of Canada’s high-growth phase and the entry into a post-boom housing era. Inflow hubs (Vancouver, Toronto) still hold value potential once pricing clears and capital is de-risked; other segments face a long de-stocking. Simply “lifting restrictions” will not stabilize the market—policy must move from passive loosening to active support. The focus must shift from preventing overheating to preventing over-cooling, and the industry model must pivot from “high-leverage, high-turnover” to “high-quality, high-tech, high-productivity.”

Short term

1）Stand up a true national “Housing Bank” function—at scale, at cost, with fairness.
Use Build Canada Homes as the nucleus of a credit backstop that:

• Credit-enhances viable condo and BTR (build-to-rent) projects in core metros, offering long-tenor, low-spread take-out debt and pre-sale guarantees where pro-formas clear at realistic rents/prices.

• Warehouse-purchases completed-but-unsold units (particularly family-sized) into public/non-profit rental with transparent allocation, preventing fire-sales while adding durable rental stock.

• Gate new approvals where the months-of-inventory > 36 for a given segment, until absorption normalizes (avoid adding fuel to weak submarkets).
  (Why) This directly addresses the equity/financing hole created by the investor retreat that Ben Myers and others highlight. (UrbanToronto)

2）Lower the cost of capital & frictional taxes—targeted, temporary, transactional.

• Let BoC’s easing work through, but amplify with insured take-out programs and MLI Select-style expansionsfor rental; allow portable/refi windows for end-users facing renewal shock. (Bank of Canada)

• Time-limited remissions/deferrals of development charges and municipal CACs on family-sized and rental units; GST/HST rebates on purpose-built rentals extended and standardized; accelerated CCA for rental.

• Trim tariffs/supply bottlenecks on key materials (prefab components, heat pumps, electrical gear) to reduce hard costs in 2026–2028 delivery cohorts.
  (Why) Every 50–100 bps of cost removed revives marginal pro-formas and speeds clearance—without re-igniting speculative demand.

3）Unclog approvals and remove counterproductive bans (by-city tailoring).

• Fast lanes: standardized code paths, fixed review clocks, and “pattern-book” designs for multiplex, mid-rise and rental near transit.

• Re-evaluate bans/quotas that suppress genuine absorption where pipelines are failing (e.g., calibrate the foreign-buyer ban to permit bulk, no-flip purchases into long-term rental with covenants; open targeted end-userincentives for families).

• Consumer protections (escrow, cancellation insurance) to coax end-user presales back in a limited, safer way, complementing the investor base rather than pretending it isn’t needed.
  (Why) You cannot clear stock without speed + certainty. The GTA example makes it plain: kill the investor presale and provide no substitute, and the pipeline collapses. (UrbanToronto)

Long term

• Metropolitan strategy：Aim new supply where jobs + transit + population will be. Stop greenfield reflex; upzone transit rings; assemble public land through BCH for portfolio-scale delivery. (Housing Infrastructure Canada)

• Financial stability：Dynamic macro-prudential (LTV/DTI/stress tests) that lean against both bubbles and slumps. Keep mortgage markets liquid while avoiding a leverage-led rebound. (Bank of Canada)

• People-land linkage：Tie starts and approvals to verified demographic demand in each metro, consistent with the new immigration trajectory; avoid building where net outflow persists. (Canada.ca)

• Tax reform：Shift from one-time extraction (charges at permit) to predictable annuals; sharpen vacancy/empty homes tools to hit true under-use while protecting productive rental; reduce transaction tolls that freeze mobility.

• Rent + own：Treat build-to-rent as equal pillar; professionalize operations; protect tenants while ensuring investment is bankable. CMHC’s own mid-year shows federal construction finance underpinned ~88% of new rental starts in 2024—double down on what works. (Blob Storage)

• Industrialized delivery：Back prefab/modular, standardize components, and bulk-procure with BCH to compress cost/ time—recognizing prefab isn’t a silver bullet yet, but can be with scale and code standardization. (Renx Homes)

6) What This Means—By Stakeholder (Vancouver & Toronto first)

• Developers: Pivot to balance sheet strength, product-market fit, and delivery certainty. Assume lower peak pricing, prioritize family-sized + rental-ready plans near transit. Seek BCH participation early; build in rate/rent buffers.

• Investors (institutional & retail): Focus on income-durable rental, covenant strength, and nodes with clear people-land linkage. Expect late-decade rent/price pressure upward if today’s pipeline slump persists. (UrbanToronto)

• Homebuyers: The window for price-for-volume deals is open in select submarkets; prioritize transit, schools, livability over speculative appreciation.

• Policymakers (federal/prov/municipal): Coordinate BCH + approvals + tax. The objective is soft landing via faster absorption, not re-inflation. Be explicit: anti-overheating → anti-over-cooling stance until pipelines normalize.

• Lenders: Update underwriting for a BCH-backstopped regime; emphasize absorption evidence over blunt presale thresholds when federal risk-sharing is present.

7) Closing

The era of big development has passed; the inventory era has begun. Inflow hubs can still hold value; other segments will unwind slowly. The mission now is not to dream of the last cycle, but to build for the next.

In this new cycle, policy must lead: stabilize financing (BCH as housing bank), lower costs where it counts, and clear the pipes—project by project, node by node. Canada’s housing future will favour the pragmatic optimists who align to the new rules of the cycle—and start building again.

Key references & leader viewpoints

• UrbanToronto (Ben Myers): Why investors are the linchpin of GTA condo financing; <5,000 presales (2024); completions cliff to <10,000 by 2028; “you got what you wanted; we’re all worse off.” (UrbanToronto)

• Urbanation (market data): GTHA Q1-2025 sales lowest since 1995; Q2-2025 only 3 launches/891 units; unsold inventory ~24k; record completed-unsold. (urbanation.ca)

• Vancouver overhang: Completed-unsold condos >3,400 by YE-2025; rising rental vacancy from 0.8% → 1.6%. (Mortgage Professional Canada)

• Industry signal (Beau Jarvis / Wesgroup): Layoffs (12%) as economics “left us no choice”—a bellwether of capital-stack distress. (BIV)

• Policy pivot: BoC rate cuts to 2.50%; immigration reset (temporary resident cap to 5%; population dip possible in 2025–26); Build Canada Homes launched with $13B and mandate to derisk + build. (Bank of Canada)