Housing starts are picking up but not enough to meet demand in the country
The number of housing starts reached 299,589 units in the country last September, up 11% from August.
Despite a sharp rise in housing starts across the country in September, the supply of new homes still fell in the country's major urban centers from January to June, notes the Canada Mortgage and Housing Corporation (CMHC) .
According to the latest data from the federal agency, the seasonally adjusted annual rate of housing starts in Canada reached 299,589 units last September, 11% more than in August.
This is the highest rate of housing starts observed since November 2021, underlines the CMHC.
Housing starts in urban centres, which reached 276,142 units in September, were up 12% compared to September 2021, while rental housing starts increased by 16% to 216,549 units, still in urban areas . Single-detached home construction there remained relatively stable at 59,593 units.
In rural areas, an estimated 23,447 units were started last month across the country.
However, despite this increase, the supply of new housing still does not manage to meet the demand in the six largest urban centers of the country, noted the CMHC in its Report on the supply of housing released today alongside September statistics.
Hampered by rising construction costs, shortages of materials and labour, and rising interest rates, new housing starts actually fell 5% between January and June 2022 in the six largest Census Metropolitan Areas (CMAs), reports CMHC.
An apartment tower under construction in the Quartier des spectacles, in Montreal.
This slowdown mainly affected the construction of apartments in large urban centers, which is not good news for the supply of affordable housing in large cities.
The main problem affecting housing affordability in Canada is that supply does not keep pace with demand. Simply put, Canada faces a housing shortage, CMHC warns in its report.
“Rising construction costs and material shortages have been felt in all markets. These factors have delayed the completion of buildings and undermined affordability.
— From Housing Supply Report
Recently, CMHC economist Francis Cortellino estimated that 1.1 million housing units would need to be added by 2030, or 120,000 per year, to return to an affordable market in Quebec only.
In its latest analysis of the real estate market in the metropolitan areas of Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal, CMHC estimates that soaring mortgage rates and shortages could continue to 'affect the number of new new apartments for months to come.
Indeed, despite five consecutive hikes this year in its key interest rate, which now stands at 3.25%, the Bank of Canada has barely succeeded in bringing down inflation, which was hovering around 7% last August. This suggests further increases in mortgage interest rates, and by extension that of rents, since these cost increases are generally passed on to tenants.
- Increasingly difficult to build affordable housing
Although construction slowed in the first six months of the year in the metropolis, housing starts still remained higher than in previous years.
Starts fell in the first half of 2022 for all housing types, especially for freehold homes. This decline is explained by the weakening of the demand for large dwellings, which had temporarily increased at the start of the pandemic, explains economist Francis Cortellino in the CMHC report.
The construction of rental housing, which fell by 47% on the island of Montreal compared to the first half of 2021, was however offset by the increase in apartment starts (+8%) in several areas of the suburbs. , particularly in Laval (+17%), on the South Shore (+7%) and on the North Shore (+5%).
At least 70% of new rental units started in the first half of 2022 were located in the suburbs of Montreal.
The Queen City, meanwhile, remained the leader in housing starts in the first half of 2022, posting increases notably in the construction of townhouses and condominium apartments.
Condominium apartments are the most built housing type in the Toronto CMA. In the first half of 2022, 11,992 condominium apartments were started, the majority (71%) in the cities of Toronto and Mississauga. This is a 7% increase from the first half of 2021 (11,257 units) and the third highest level on record, point out analysts Dana Senagama and Christopher Zakher.
As in Montreal, rental housing starts were down in Toronto in the first half of 2022, down 24% compared to the same period in 2021 .
The number of housing starts remained above the average of the last five years, despite a drop in activity in the construction sector.
Falling starts of single-detached homes and condominium apartments lowered overall activity in the first half of 2022 compared to a year earlier. In contrast, starts of townhouses and rental apartments have increased, says CMHC.
Densification has increased faster inside the Greenbelt, but apartment building is also up outside of it, according to the federal housing agency.
< p class="e-p">In Greater Vancouver, housing starts are down 23% in the first six months of the year compared to the first half of 2021.
Paradoxically, rental apartment starts – which are up 18% from the first half of 2021 – have reached a high not seen in decades, according to Eric Bond, Senior Market Specialist at CMHC.
< p class="e-p">Low vacancy rates, record migration to British Columbia and continued upward pressure on rents have encouraged developers to press ahead with their projects rentals during the first half of the year, explains Mr. Bond.
The resumption of post-pandemic immigration is also increasing the supply of labor in the construction sector on the West Coast, which does not, however, prevent construction delays and rising construction costs. new housing projects.
In Edmonton, strong demand for single and semi-detached homes dominated the first half of 2022. Demand for condominium units also increased.
The high vacancy rate has slowed rental apartment starts, which hit a new record in 2021, their highest level in more than 30 years, CMHC points out, however.
Here too, the problems of supply and inflation are causing their share of delays on the construction sites of the urban agglomeration where the average duration of the construction of dwellings has lengthened.
In neighboring Alberta, Calgary, housing starts for all housing types remained high in the first half of 2022 compared to the previous year.
< p class="e-p">While activity slowed in other metropolitan areas across Canada, housing starts in Calgary were higher than in the first half of 2021 across all housing types. In particular, apartment starts rose nearly 30% and accounted for an above-average share of residential construction, says Michael Mak, senior analyst, market intelligence at CMHC.