Canada’s building sector just added more fuel to inflation. Statistics Canada (Stat Can) data shows construction costs grew sharply in Q2, with quarterly growth now running at twice the central bank’s target inflation rate. The accelerating price growth is a new inflationary headwind, with the agency attributing it to counter tariffs and a lack of skilled labour to keep up with the excess demand from builders.
Canadian Building Costs Are Rising More Than 2x Inflation Target
Canadian construction costs: Quarterly change for Q2 2025.
Source: Stat Can.
Canadian builders saw construction costs rise rapidly, with growth accelerating. Residential (home) building costs climbed 1.0% in Q2, running at an annualized growth rate just over double the Bank of Canada’s (BoC) 2% inflation target. This was faster than the 0.9% growth reported in Q1, with Q2 prices up 3.7% since last year.
Non-residential building costs are rising even faster. Construction costs were up 1.6% in Q2 2025, following 1.0% growth in Q1. Q2 costs are now 4.0% higher than last year, with annualized growth for the most recent quarter running at more than triple the BoC’s target inflation rate. It’s not just faster growth—it’s now an inflationary threat.
Material Costs Are Rising Fast Due To Protectionist Measures
The sudden return to acceleration was caused by a handful of segments last quarter. Quarterly growth was driven by plumbing (+3.7% q/q), HVAC (+3.0%), utilities (+2.9%), and structural steel (+2.7%). Rising steel prices are a big headwind for multi-family construction, driven in part by pre-Trump protectionist policies we highlighted last year.
Counter Tariffs and Lack of Skilled Labour Blamed For Rising Costs
Construction firms attribute rising costs to counter-tariffs and labour shortages. In response to US tariffs, Canada implemented counter-tariffs on certain US imports. The measure was meant to level the playing field, but it’s backfiring. Local firms are paying more for goods, and rising input costs mean higher costs for end users. Stat Can notes the counter tariffs not only caused higher builder costs, but also supply shortages and project delays. All of these factors contribute to higher housing costs.
The agency also noted that builders cited a persistent skilled labour shortage as a driver of costs. More precisely, the cost of labour won’t fall without a surplus of workers. Ironically, the breakneck building that’s driven the industry to overcapacity is a direct result of an attempt to aggressively find excess skilled labour through lofty immigration targets.
The recent slowdown in population growth should help cool demand, but it will take time. However, the recently elected government’s mandate included doubling the rate of new homes built. This is at odds with the current population growth throttling, which may signal that a policy reversal is on the table.
How does Stat Can even math if a 25% tariff increase only translates to a 4% jump?
Plumbing supplies as a whole, from tools to materials, are up across the board.
For two years now I’ve been hearing that steel prices are falling everywhere else in the world but Canada and the US. If they fall here, it threatens national security—unlike not having an affordable place to live. The unjustified fear of 5,000 steel workers is greater than the need of hundreds of thousands of homes we need to build, according to government.
The only thing that is universal next to Big Bang is Canadian Real Estate costs. It always goes up. For the past 5 years from Pandemic, Labor shortage, Lumber increases, supply pressures, Demand pressures to now Tariffs. lol!! The lumber prices gone down significantly, but it never get translated into lower prices for end users and buyers. I understand land and taxes in various forms are reasons, but when you are in a market governed by monopolies, from builders to real estate agents along with government, this happens. No surprise. This is by design.
There is also the cost of structural maintenance for older buildings including condos where an automatic liens supports condo to owner billing’s for reserve funds and special assessments
Even though there is a cyclical audit for structural retrofits for common elements the condo authority of Ontario still doesn’t have an accurate figure on maintenance cost pressures (or green house gas emissions) because its act doesn’t mandate this
So at best it did a voluntary survey and concluded that the benchmark dilligent boards used eg the cpi was not a realistic anchor (so who provided this or similar in training modules hmmmm) and that the residential construction index would be better but its reports indicates this voluntary survey to get a grip on maintenance costs was just a first step
The automatic liens while in place presumably to prevent the worst of maintenance laxity seen in purpose built rentals and social housing raises a further question as to why the deliberate exclusion of mid and high rise condos in the nrcan green home remits and favouritism of dwellings that don’t have the automatic liens and echos since of less than equal distribution of remits for structural and eco related retrofits including for windows (using steel frame for longevity from a range of options ) so it would appear condo owners especially those who dwelling in older condos are not able to take advantage of all those remits even though their property is a lower rung on the property ladder and this is before one contemplates the newer micro condos that are standing empty despite a housing affordability crisis
Those new purpose built rentals will also need to be maintained so eventually yes there will be rent pressure to address this of the kind condo owner dwellers are now coming up against now
As your article suggests policies to bei h much better anchored to reality