Canada's Construction Sector Faces Mixed Outlook as Activity Rebounds Amid Rising Costs

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Despite a rebound in construction activity, rising costs and trade uncertainties present ongoing challenges for Canada's construction sector heading into 2027.

OTTAWA — As Canada’s construction sector looks ahead to 2027, the outlook remains characterized as 'uneven' despite a recent uptick in activity. According to the latest quarterly report from the Canadian Construction Association, the sector's GDP experienced a one percent increase in the second quarter, buoyed by advancements in both engineering and residential construction. This positive development follows two consecutive quarters of decline, bringing overall construction activity back to levels comparable to those a year ago, as highlighted by the association.
However, the report warns of potential hurdles that could impede the sustainability of this growth. Notably, the construction industry continues to grapple with rising input costs. Data from Statistics Canada revealed that non-residential building construction costs surged by 3.5 percent year-over-year during the quarter, while costs for residential buildings climbed by 2.3 percent. Among the most affected sectors, steel-intensive construction categories are facing some of the steepest increases, exceeding eight percent year-over-year.
Several factors contribute to these persistent pricing pressures throughout the construction supply chain. Higher fuel prices, tariffs imposed on steel and aluminum products, along with additional duties on imported wood cabinets and vanities, are driving costs upwards. The report also underscores the broader implications of ongoing trade uncertainties impacting the sector. Approximately 40 percent of the materials used by Canada’s construction industry are imported, with the United States contributing significantly to this figure.
The association highlighted that exposure to trade risks is particularly pronounced in the engineering construction sector. In fields such as communications and oil and gas engineering, around 40 percent of inputs are sourced from the U.S., while residential construction relies on imports from the U.S. for about 21 percent of its materials. The report noted, "Many contractors saw the tariff announcements. Far fewer heard of new remissions that came quietly in their wake."
While the long-term project pipeline appears promising due to nation-building ambitions, the report cautioned against losing sight of the immediate pressures facing the industry. Geopolitical conflicts have ongoing economic repercussions that can linger, affecting energy markets, trade flows, supply chains, project costs, and timelines long after the conflicts themselves have receded from public focus.
The report also pointed out the challenges within the residential construction pipeline, particularly in Canada’s largest markets. Contractors are encountering stagnation in project growth, especially concerning high-rise residential developments. This slowdown coincides with a period of stagnant population growth in Canada, with the Greater Toronto and Hamilton Area experiencing a marked decline in the pace of new condominium projects compared to previous years.
Nicole Emmett, the association’s vice-president of communications, marketing, and member services, commented on the industry's situation, stating, "Our industry remains resilient, but we are increasingly divided between emerging opportunities and near-term challenges." This sentiment encapsulates the dual nature of the current landscape, where growth opportunities exist alongside significant obstacles that need addressing.

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