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A recent Report Reveals a Decline in Housing Starts Across Canada.

Posted by Editor on July 4, 2023
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A recent report from the Canada Mortgage and Housing Corporation (CMHC) demonstrates how far behind the United States Canada is in terms of increasing housing supply.

The standalone monthly seasonally adjusted annual rate (SAAR) for all housing starts in Canada fell by 11% in March, from 240,927 units to just 213,865.

An attempt is made to eliminate all seasonal variation in the data using a SAAR, which is a rate adjustment used for business or economic data. It gives you the ability to contrast monthly levels with annual averages and provides you with a sense of the relative strength of any given month’s activity. The most accurate comparisons between various points in time can be obtained by accounting for the seasons because the majority of data is affected by the time of year.

192,545 units fewer urban starts were made each month, a 12 percent decrease. The number of urban multi-unit starts decreased by 11% to 151,769 units in March, while urban single-detached starts experienced a significant decline of 16% to 40,776 units.

In addition, the trend for housing starts in March fell from 254,658 in February to 240,664. The monthly SAAR of housing starts in Canada is being trended as a six-month moving average. The CMHC accounts for the significant variation in monthly estimates using the trend measure in conjunction with their monthly SAAR statistics to ensure they have a clear picture of the upcoming housing supply.

Let’s Get into the Details

Canadians were affected by the lack of construction. In urban neighborhoods with a population of 10,000 or more, new residential construction decreased in eight of Canada’s ten provinces.

Housing starts in Quebec fell by nearly 12,000 to 27,003 while housing starts in Ontario fell by about 21,000 to 75,381. In Saskatchewan, where there was a decline of 53%, there was the largest decrease.

British Columbia, on the other hand, saw an increase in housing starts of 40%, from 13,602 to 47,994.

Cities across Canada suffered severe damage. Toronto saw a 26% drop in total housing starts while experiencing a 28% drop in single-detached housing starts. Barrie’s decline was 42%, Hamilton’s was 35%, Edmonton’s was 10%, and Montreal’s was 12%.

 

How Do These Statistics Affect Canadians?

The nation is already struggling to deal with a historically low amount of new housing inventory at the time of March’s slowdown.

Buyers have been hesitant to enter the housing market since the 2022 rate hikes, choosing instead to “wait it out” and observe the outcome. Due to the need to sell the majority of their units before work can start, developers have found it challenging to launch new projects as a result of this hesitation. The project won’t be launched by developers who feel they won’t be able to generate the required number of sales. In actuality, a lot of developers wait to introduce their condos until they are confident there are enough buyers in the market.

 

Numerous other obstacles prevent Canada from developing the necessary housing supply. They comprise:.

  • Long approval processes by the government that cause delays between the time a development is proposed and when construction begins.
  • a rise in construction costs and construction times due to a shortage of skilled workers and supply chain problems.
  • Construction costs soar when supply is increased.

The housing stock-to-population ratio will start to decline if current trends continue, especially in Ontario.

These delays have made the housing market more and more unaffordable. The last time housing in Canada was reasonably priced, according to CMHC, was in 2003 and 2004. A household earning the average income would need to spend 40% of their disposable income to buy a home in Ontario and 45% in British Columbia during this time period due to housing prices falling to the Maximum Affordable Price level. As a point of comparison, in 2021 the typical household would need to spend close to 60% of its income.

 

The time to build is now, despite the decline in construction rates.

The gap between supply and demand grows wider as fewer developments are put under construction and more immigrants come to the country. For the past 20 years, supply and demand have not been balanced in Canada’s largest urban areas.

According to CMHC, Canada needs to add an additional 5.8 million homes to bring the total number of housing units to 22 million by the year 2030 in order to restore housing affordability. Ontario, British Columbia, and Quebec will experience the greatest housing shortage. 1 point 85 million homes will be required in Ontario alone. Low-income families would still have difficulty making ends meet even if these goals were achieved.

While the supply of housing will rise on the current course, more must be done to address affordability. By 2030, the housing supply will only be up to 19 million thanks to the current construction rates, which allow for only 2.3 million new homes.

 

How Should You React as an Investor?

For many years to come, Canadian housing will remain in high demand due to a combination of low supply and rising demand. Renting will become more popular as a more cost-effective alternative to buying as prices rise. This much-needed service can be offered by you, the investor.

Investing in Canadian real estate is a surefire way to make money because, unlike the stock market, you can always count on its value to rise over the years. Time, though, is of the essence. The market will only heat up, as shown by the low statistics on housing starts.

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