Canada might not have a problem growing its population, but it has a big problem building housing. CMHC data reveals that new housing starts fell in August, despite the population boom. Only two provinces, BC and Ontario, have seen growth over the past year. The declines are expected to continue, prices were driven out of reach for end-users, and investors are no longer interested due to climbing rates.
Canadian Housing Starts Declined Slightly
Canada has seen the new housing construction starts take a dip on the back of weak demand. The seasonally adjusted annual rate (SAAR) of new home starts fell 1% to 253k units in July. Construction starts for urban housing fell 1%, with urban multi-unit construction falling 1.4%, pulling down the 1.7% increase when it came to single-detached urban starts.
Only BC and Ontario Saw New Housing Starts Increase
BC and Ontario are the only two provinces to see growth, concentrated in their largest cities. In BC, Vancouver saw new construction rise 47% higher compared to last year. In Ontario, Toronto saw a 28% increase over that time. The rest of the provinces have actually seen new construction starts pull back, despite population growth.
Canadian Housing Starts Expected To Pull Back Even Further
Experts expected the pullback to occur with such stretched affordability and rising interest rates. New construction doesn’t begin until a good share of the project is sold, but end-users have seen investors drive prices out of reach. As a result, most demand for new construction is driven by investors, who own the majority of recent builds. Higher interest rates reduce the leverage they have, and without a major decline in prices, end-users still can’t afford to pick up the slack.
The result is housing starts are expected to erode even further in the near future. “The August dip in housing starts was smaller than we expected, but starts have now fallen for the second consecutive month,” said Tony Stillo, Director of Canada at Oxford Economics.
Adding, “We anticipate housing starts will weaken further – likely to less than 200,000 units SAAR later this year and into early next year – as Canada’s emerging recession deepens and higher mortgage rates raise financing costs both for home buyers and for home builders.”
Stillo doesn’t expect to see any signs of improvement for at least a year. By the second half of 2024, his team anticipates a recovering economy and government measures will encourage more supply. Until then, expect it to get worse before it gets better.
Importing another two million Uber drivers should solve all our problems
Don’t forget that current housing starts mostly reflect condo presales from several years ago.
In another six months or so the starts will reflect presales from the period after interest rates were significantly increased.
This will result in a complete collapse of the GTA housing industry and massive layoffs of construction workers ushering in a nasty recession!
All by design. Everything is rigged, from lotto to options trading. A collapse in home prices in Toronto, Van, Canada as a whole means the entire economy collapses and Canada heads into third world poverty territory. Canada is $9 trillion in debt, owes nearly $3 trillion to foreign creditors. Canada has some of the highest tax rates in the world so you cant tax anymore, when the spending gets cut (Never going to happen) then it will cascade into mainstreet – increased violence, rape, murder, theft etc… Remember when Canada avoided the 2008 collapse? I think we didnt.
So, despite federal incentives to increase housing construction, and provincially (at least in Ontario) the move to make more land available, and broad proclamations of a housing shortage, there’s a pull-back in building starts???
I thought the common mantra was that to address the affordability crisis, we just needed to build more (and affordability will magically reappear, at some point, somehow) — so how is it that if the ‘demand’ is there (and for sake of discussion, we’ll keep it to the demand for principal residences), the amount we’re building is starting to decline or slow down? It almost appears as if those who control the supply of homes, is deliberately keeping production lower in order to keep prices elevated.
Granted, BC and Ontario are seeing increases in these starts, but at what point does one look at this pan-nationally, and see that the affordability crisis is really driven
by liquidity?
I work in a trade. I’ll tell you nobody’s listening to the boots on the ground. If you want to know what’s happening Ask the trades But beforewarned it’s scary. Builders are pulling back and creating The void on purpose. How is it There are framers and other trades not working right now. Canada is an absolute disaster. I have family in California. And you can’t even compare the 2. And we here all sorts of horror stories about what’s going on there, and it’s nothing compared to here.
Time for governments Federal and/or provincial to start building housing again. It’s the only way to have affordable housing.
Any stats on the assignment condos? Those are the hidden treasure trove of parasitic investors.
The fact that these contracts are never disclosed is crazy, probably a 300K buffer from the actual cost of a condo and the list price + over asking bids.
Most people don’t realize preconstruction condos are priced higher than existing built units. This is because preconstruction investors became so confident that preconstruction units would appreciate to and above the price they bought it for in the time it got built, 3 to 5 years. Now that no expects this to happen anymore no one is buying. The investors don’t expect to be able make a buck when preconstruction is priced 30% over existing resale units, and live in buyers definitely aren’t going to pay a premium to have to wait three years. Developers can’t lower prices 30% because escalating costs and the price they paid for the land may have these inflated prices built in. One end of the rope has to break, interest rates, developers sitting on idle hands with high debt loads or what people are willing to pay. Otherwise nothing is going to change. Mt bet is it’s interest rates and what people are willing to pay as the housing shortage gets far worse still. We haven’t seen nothing get in my opinion unless interest rates drop a lot very soon.
At what point do we realize that real estate as an investment commodity has to end… or Canada will fall apart…
100% capital gains tax on 2nd+ home capital appreciation.
Tax 2nd+ home rental income to the point where it is only just above inflation
Make it completely undesirable to look at the real-estate market as a investment class.
Get people to invest their low unit to Canadian stocks and ventures, productive assets… not unproductive housing…
Use all that money for building non profit rental housing…
1 home per adult… that’s it. You want a cabin, that’s fine, but don’t expect to make money off it