Homebuilding Starts in Canada Not Where They Need to Be

Published March 7, 2022 by Real Estate Leads

Discussions around the less-than-ideal state of the Canadian housing market will take all sorts of approaches, but one aspect of it all that doesn’t get talked about enough is the way the number of new building starts is not anywhere near what it needs to be if housing supply shortages are to be addressed. The fact that building intentions are once again back in correction territory is yet another piece of news that isn’t a positive for the outlook on Canadian housing. These declines have been consistent, and we’ll talk about how that is and what it can indicate for the future.

What’s most notable about this is that permits issued for new home builds of all sorts are way up from where they were in early 2020, but that doesn’t change the fact that building intentions being down shows that there is less enthusiasm on the part of the builder to build. Is that because the types of housing being promoted by local governments isn’t the type of housing developers would prefer to build? Maybe, but that remains speculation.

Vibrancy and health in the housing market is dependent on a sufficient supply of homes being for sale, and the profitability of a career in real estate is also tied into that. Some realtors may be struggling to cement themselves in their new career choice, and for these people our online real estate lead generation system here at Real Estate Leads comes highly recommended. It is a means of getting a leg up on other realtors when it comes to being first in touch with prospective clients.

Let’s stay on track with the topic for our entry here though, and specifically with how building intentions can be a very different indicator than the number of building permits issued.

Down 11% From Peak

Across residential and non-residential sectors we are seeing building intentions lose steam. In January of this year seasonally adjusted value of permits dropped down to $10.1 billion, an 8.8% dip from the previous month. The highest number there was recorded this past November but is now 10.96% lower than where it was then, and that definitely does qualify as a correction. This was primarily in the residential sector, but if we look at the combined seasonally adjusted value of Canadian residential and non-residential building permits in current and inflation-adjusted dollars we see much of the same trend.

Unprecedented inflation rates are also part of the big picture right here and now in 2022, and inflation in Canada is running so high that annual growth is suffering for it. This affects real estate directly as you would imagine it would given how much of Canada’s GDP comes from real estate (regrettably). Seasonally adjusted real growth took a monthly plunge to the tune of 8.23% in January and March of 2021 seems to be when inflation reached its adjusted peak. Permit values now being 17.54% lower than they were at that peak is not a good thing in any way, shape, or form when you understand that developers build homes to make a profit, as would any business.

Building Intentions Down 18% From Peak

Residential real estate is always going to be where most permit value is found, and these homes are the ones that are behind the large decrease in values. Seasonally adjusted residential building permits went down to $6.72 billion in January, and 11.63% drop from the last month of 2021 and down around 18% from the peak seen in March 2021 as mentioned. A correction is defined as any drop of more than 10% , and so with the number being near double that what we have is something much more drastic than just a correction.

The primary factor in this decline was a sudden lack of enthusiasm for multi-family units, but again consider what we alluded to before – developers build types of homes that are a) in demand, and b) bring them the largest profit. But no matter whether you agree with that or not, the decline in building permits does indicate falling intentions for building future. Yes, they are 50% higher than anything seen through or before 2020 but that’s a comparison to excessive demand. There are still many homes coming to market, but enough? Nowhere near it.

Last but not least we need to remember that labour and material prices are up significantly too because of large-scale building over such a short period. This drives the cost of building higher as more homes were built and growth is then accelerated further.


Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered to only one realtor – you. You receive them exclusively and they will be for people living in the same city or town and are showing themselves ready to make a move in the real estate market. It’s a great way to maximize your client prospecting efforts and you can always see our testimonials to hear how real estate agents like you have already benefitted from it in a big way.