The Canada Mortgage and Housing Corporation (CMHC) released its monthly housing starts figures, announcing that starts trended upward in April 2017, despite the nearly 20% decline in Ontario. National housing starts trended at 213,768 units, compared to 210,702 in March. The trend is a six month moving average of seasonally adjusted annual rates (SAAR).
“New housing construction increased in Canada, with seasonally adjusted data exceeding 200,000 units for five months in a row,” says Bob Dugan, CMHC’s Chief Economist. “The increase in the trend was mainly due to apartment construction in British Columbia and Québec, which was partly offset by a decline in Ontario’s multiple starts.”
Overall, the standalone monthly SAAR was 214,098 units, down from 252,305 in March 2017. The SAAR of urban starts dropped 15.3% to 199,485 units, with multiple urban starts decreasing 16.7% to 134,314 and single starts falling 12.1% to 65,171. Rural starts are estimated around 14,613 units.
In Québec, starts were actually down in April, but the total starts for the first four months of 2017 is up 30% compared to last year, mostly due to multiple starts. In Kelowna CMA, both single-detached and multiple starts are up, partially due to many new rental apartment projects starting construction this year. The rental projects are a response to the low vacancy the area has been experiencing for the last two years.
As for Toronto, housing starts remained stable in April. There was a slight increase in single-detached starts, but there was a decline in multiple starts. New starts for singles and townhomes hit a nine-year high for April. CMHC believes that the tight resale market conditions have caused a lot of spillover into the new home market.
With new condo sales recently hitting record highs, we believe this dip in starts is only temporary. Once the industry begins construction on all the units that sold in the last few months, we’ll see an uptick. In March 2017 alone, there were 4,500 new condo sales in the Greater Toronto Area (GTA).
And since resale prices are still on the rise (despite an increase in listings), we expect more buyers to turn to the new home market for a wider selection of options. That said, we recently attended a seminar hosted by Ryerson University’s Centre for Urban Research and Land Development, where they discussed the five factors that are preventing new housing supply from meeting demand. So, while the resale market is tight, things aren’t much looser on the new home side.