Single-detached housing starts down 25% from last year: CMHC

  10/5/2023 |   SHARE
Posted in New Developments by Vanguard Realty | Back to Main Blog Page

The number of new single-detached houses under construction in the first half of 2023 was down 25% compared to last year.

That translated into 9,523 new single-detached units under construction in the country’s six largest Census Metropolitan Areas (CMAs), according to data released today by the Canada Mortgage and Housing Corporation (CMHC).

The agency says high interest rates, reduced access to credit and elevated construction and labour costs have created challenging conditions for homebuilders across the country, leading to fewer projects getting started and also an increase in construction timelines, which was up by 0.9 months.

“Given larger building size and resulting longer preparation time of the buildings started in Toronto and Vancouver, the numbers posted in these cities are the result of a process that began at a time when financing and building conditions were considerably more favourable,” Kevin Hughes, Deputy Chief Economist for the CMHC, said in a release.

Construction of semi-detached (-22%) and row units (-17%) were also down year-over-year. Starts of all units combined, however, were up slightly by 1%, buoyed by a 15% increase in apartment dwelling starts, or 48,029 units in the first six months.

CMHC also said that Toronto and Vancouver accounted for nearly two thirds of housing starts across the six metro areas.

Overall, construction began on 65,905 new housing units in the first six months of the year. To put that into perspective, CMHC said in a previous report that in order to meet demand, Canada needs to build 3.5 million additional housing units on top of the 2.3 million units that are currently on track to be completed by 2030.

Regional differences

The pace of new construction varied greatly between metro areas, with Vancouver, Toronto and Calgary trending above levels seen over the past five years, while Montreal, Edmonton and Ottawa saw housing starts trend lower.

The slowdown in housing construction was most pronounced in Montreal, where overall starts in the first half of 2023 were down 58% year-over-year. Compare that to a 49% and 32% year-over-year increase in starts for Vancouver and Toronto, respectively.

CMHC explains this discrepancy as being partially due to shorter construction periods in Montreal due to there being a greater proportion of low-rise and smaller structures.

“The decline in housing starts in Montreal was, therefore, more reflective of the recent deterioration in financial conditions,” CMHC noted.

In Toronto, however, apartment projects tend to be larger and take more time between planning and construction. “Many projects started in the first half of 2023 would have been financed during the more favourable macroeconomic and financial conditions of 2022,” CMHC said.

Because of this, Hughes says Montreal “is probably a better barometer to give us an indication of the sign of the times in rental construction.”

CMHC’s housing outlook

CMHC says economic challenges, including high interest rates, will slow the pace of apartment starts in both Toronto and Vancouver by the second half of the year. It expects starts to return to 2022 levels.

Today’s higher barriers to homeownership, including high home prices and elevated interest rates, along with record-high immigration levels, are expected to contribute to ongoing high rental demand.

That demand is expected to exceed purpose-built rental supply, CMHC noted.

“Despite increases in some centres, the overall level of new construction activity remains too low to address the country’s affordability and housing supply crisis over the longer term,” the report said. “Significant increases in the construction industry’s productivity will be critical to ensuring supply can be increased to address this crisis over the longer term.”

Source: Canadian Mortgage Trends

Canada Real Estate, Canadian Housing Market Slowdown, Housing Starts