Ontario Construction News staff writer
Canada’s construction sector posted modest growth in the third quarter of 2025, but rising costs, labour constraints and policy uncertainty continue to pose risks heading into 2026, according to a new report from the Canadian Construction Association.
The association’s winter edition of Construction Quarterly Economic Insights shows construction GDP output increased 1.3 per cent in the third quarter, as federal investment commitments support activity across the industry.
“The opportunities ahead for our industry are significant, but so are the risks,” association president Rodrigue Gilbert said in a statement. “Investments from the federal government will drive growth, but rising costs and workforce constraints will continue to limit the industry’s ability to unlock its full potential and deliver on Canada’s ambitious construction agenda.”
November’s 2025 federal budget included $89.7 billion in net new measures over five years, with $32.5 billion classified as capital investments. Approximately $32 billion of that total is earmarked for construction-related spending over the period.
Cost pressures remained elevated in the third quarter. The report shows the Building Construction Price Index rose 4.2 per cent year over year, driven by higher prices for metal fabrications, structural steel and plumbing. Factory construction costs increased 5.7 per cent, while office building costs rose 3.2 per cent. London, Ont., and Quebec City were among the jurisdictions most affected by price increases.
Construction entered 2026 with steady momentum, supported by stronger-than-expected building permit values late in 2025. Lower interest rates helped underpin activity, though the report notes that with rates now on hold, the boost from increased liquidity is expected to fade in the coming months. While resale housing activity has improved, weak apartment pre-sales continue to slow new multi-residential projects.
The report also flags growing uncertainty around material sourcing and pricing as Buy Canadian policies and tariffs expand. With Canada-United States-Mexico Agreement trade talks scheduled for July, contractors should expect continued pressure on pricing, supply chains and compliance requirements.
Although the federal budget has been tabled, the association cautions that key details could still change through the Budget Implementation Acts. While fiscal policy has turned strongly expansionary and construction-intensive, operational cuts and procurement restrictions could slow approvals, particularly for projects not prioritized by the federal Major Projects Office.
Labour demand is expected to rise as new projects move into the construction pipeline. At the same time, lower immigration targets and a reduced share of temporary residents are expected to tighten labour availability, putting renewed focus on whether programs such as the Union Training Innovation Program and the Foreign Credential Recognition Program can meaningfully address workforce shortages.
Among the report’s key findings:
- Canada’s economy rebounded in the third quarter of 2025, with GDP growing at an annualized rate of 2.6 per cent and surpassing $2.5 trillion. The Bank of Canada is expected to hold interest rates at 2.25 per cent through much of 2026.
- Building permit values declined 5.1 per cent in the third quarter to $32.5 billion, a 9.9 per cent year-over-year drop. Ontario recorded the largest quarterly decline at 15 per cent, though early fourth-quarter data suggests a rebound.
- Federal Budget 2025 reinforces long-term construction demand, committing $280 billion in capital investments over five years. New measures introduce $150 billion in net spending before operational savings, with roughly one-fifth tied to construction-related activity, aligned with priorities to attract private investment, prioritize Buy Canadian procurement and support unionized labour.
