There are a lot of areas with regards to the housing market in Canada where individuals will be on one side of the fence or the other with what’s best for all. Over the past 5+ years however, the one issue where there is full consensus is that if a truly balanced market is to be achieved then housing supply needs to be increased in a very big way. Without that demand will continue to outstrip supply to the extent that prices will always be pushed higher than they should be.
And as is always the case in any country, it’s the desirable metro areas where this is felt most acutely. For obvious reasons new housing starts in these regions is more of a challenge and most often simply because there is a lack of available land to build homes. Nothing to be done about that part of it, but anytime the opportunity to build more housing exists then municipal and provincial governments need to be promoting that to the best of their abilities.
Which leads to the topic of this week’s entry here – that new housing starts across Canada went up very emphatically across Canada last month. Housing starts experienced a significant increase in April and the CMHC reported the monthly seasonally adjusted annual rate of total housing starts increased 22% month-over-month in April.
This of course will have connected benefit potential for anyone working in the real estate profession, and our online real estate lead generation system here at Real Estate Leads is an excellent resource for realtors who are newer to the profession. Let’s look at the relevance of this surge in new homes being built in greater detail now.
260K+ New Homes
The number attached to this surge in new housing starts is 261,559 units, and this is primarily being driven by the multi-family sector. For April it was a 33% month-on-month increase with 201,621 units beginning to be built. Oppositely, the number of starts for single-detached homes in urban areas went down by 2% to about 40,000 units. Again, this is always going to be a reflection of the fact that lack of land for development makes housing starts in populated urban areas more of a challenge.
Across the country it was Vancouver, Toronto, and Montreal standing out with notable gains in total SAAR housing starts. Vancouver had an increase of 36%, and for Toronto it was 54% and Montreal 43%. But Toronto and Montreal had declines in single-detached starts, but substantial increases in multi-unit starts made up for that shortfall. Vancouver had increases in both segments.
The biggest surprise may be in the way that the largest monthly percentage gain was seen in the Atlantic region. Housing starts increased by 4,000 units to reach a total of 10,200 homes beginning to be underway last month. The number of starts in rural areas as a whole is notable too, with the monthly SAAR estimate of 19,974 units contributing to the overall growth in housing starts across Canada.
Fewer Detached Home Starts
With all this short-term positive momentum, we need to note the trend in housing starts remaining relatively stable. There has actually been a modest 0.2% decrease from March there and industry experts say that single-detached units are responsible for this drop. The number of these homes selling has been lower in contrast to the significant pandemic-era gains seen last year, and this is resulting in slower construction activity for building single-family dwellings as detached homes.
Economists foresee new home starts continuing to trend lower, and this is because of declines in home sales low-grade factoring into weaker homebuilding. While the recent surge in housing starts reflects a return to pre-pandemic levels they will likely drop significantly for the remainder of 2023 but then recover for 2024 and 2025. Constraints with new construction with labour shortages and higher construction and borrowing costs for housing developers are expected to be key factors if starts do in fact slow for the rest of the current year.