SURGE IN APARTMENT STARTS OFFSET PLUNGE IN SINGLE-DETACHED HOME BUILDS IN 2023, CMHC SAYS
Posted in
The number of single-detached homes being built in Canada’s big metropolitan areas plunged in 2023, even though overall starts were down only slightly, according to housing supply data released Wednesday by Canada Mortgage and Housing Corp.
CMHC’s report on new housing construction trends in Canada’s six largest census metropolitan areas (CMAs) — Vancouver, Calgary, Edmonton, Toronto, Ottawa, and Montreal — found that housing construction dropped by 0.5 per cent compared to 2022, with a total of 137,915 units started.
While apartment construction surged by seven per cent to a record high of 98,774 units, the gains were offset by a decline in ground-oriented homes, with single-detached starts falling by 20 per cent.
The findings suggest that building single-detached homes is becoming a challenge for developers.
“Ground-oriented homes, especially single-detached properties, have become increasingly unaffordable for homebuyers. The share of construction accounted for by single-detached homes reached a record low and is expected to remain low in the near term,” the report said.
Even with a surge in apartment construction, the overall level of new home construction in Canada’s six largest cities for 2023 remains virtually unchanged from 2022.
CMHC deputy chief economist Aled ab Iorwerth said overall home construction in Canada’s six largest cities for 2023 remained virtually unchanged because many housing starts in 2023 involved projects that secured funding in 2022, when interest rates were lower. This timing explains why there was enough construction to maintain the level of starts in 2023 compared to 2022, but not enough to see an increase in numbers.
“Higher interest rates … really put a dent in the developers’ ability to get access to financing, and so the level of interest rates ends up being quite important,” ab Iorwerth said. “The effect of higher interest rates on getting access to borrowing will be more significant this year, so we’re a little bit concerned about housing starts this year.”
Supply barriers such as escalating costs and labour shortages were also listed as hurdles to getting projects off the ground in the CMAs.
While CMHC flagged risks from higher interest rates, the Ontario government is anticipating a surge in new home construction this year. However, it acknowledged that the province is still not on pace to reach its goal of building 1.5 million homes by 2031.
In the budget released Tuesday, Ontario forecast that 88,000 will be built, up from 80,000 predicted in the last year’s budget.
These numbers are expected to gradually increase to 95,800 in 2027, based on projections using an average of private sector forecasts.
Nevertheless, Ontario is still not on pace to reach its goal of 1.5 million homes, which would require constructing at least 125,000 homes this year, increasing to a minimum of 175,000 annually.
The budget’s provision of $1.6 billion in new funding for housing-enabling infrastructure is expected to mitigate housing target shortfalls. According to the federal government, municipalities can utilize these funds to address critical needs such as water lines and roads, addressing long-standing barriers to new housing development.On the day of the budget’s release, Finance Minister Peter Bethlenfalvy admitted that housing starts have not met his expectations. He largely attributed the slowdown in construction to high interest rates. Despite this, he expressed confidence.
“That too shall pass, and what we won’t waver on is our commitment to find more ways to get more houses (built),” he said.
