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While Canada's resale market shows signs of life, the new home market continues to decline
Published on November 13, 2024 • 2 minutes reading time
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The mood among builders across Canada remains grim. Photo by Tyler Anderson/National Post
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According to the Canadian Home Builders' Association (CHBA) 2024 Q3 Housing Market Index (HMI), sentiment among builders across Canada remains gloomy and there is little hope for a near-term recovery.
The CHBA index showed single-family housing HMI fell 2.5 points quarter-on-quarter to 27.4, while multifamily sentiment fell four points to 28.5 – both nearing the record lows of the third quarter of 2023. Despite recent interest rate cuts, high fixed-rate mortgages continue to impact affordability and slow sales activity in the new home market.
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“The really low HMI readings, which show both poor builder sentiment and the expectation of continued slower starts in the coming months, highlight the need for continued holistic policy change at all levels of government to address affordability and supply,” Kevin said Lee, CEO of CHBA said.
While Canada's resale market is showing signs of life with double-digit year-over-year sales increases in major cities like Toronto and Vancouver, the market for new homes continues to decline. Regional data shows that sentiment among new homebuilders is particularly low in British Columbia and Ontario, with “virtually no builders finding good selling conditions” in the latter province.
The once cautiously optimistic mood of developers in the Prairie and Atlantic provinces is now trending toward pessimism. In the Atlantic region, the only building category that remained positive was multifamily housing, although this sector accounts for less than five percent of national construction projects.
The data on construction starts paints a differentiated picture, with the total number of construction starts remaining stable in 2024. However, construction starts specifically for condominiums fell compared to the previous year.
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“CHBA’s HMI applies only to new condominium construction,” the report states. “While overall housing starts, which includes all construction types such as rental properties, may remain stable, the HMI focuses specifically on residential housing starts… (for which) the report shows a decline of 17 percent in the first nine months of the year compared to 2023.
The CHBA is pushing for a multi-pronged policy approach to address affordability and supply issues, with Lee emphasizing the need for comprehensive support: “While lower interest rates and other policies being implemented should ultimately help increase sales activity, they will “More will be needed, including at the provincial and municipal levels, to turn the market around and get on the path to significant increases in housing starts and supply going forward.”
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A federal policy change that takes effect Dec. 15 allowing 30-year amortization of insured mortgages for first-time homebuyers is expected to provide “some slight relief for a portion of buyers.” Still, the CHBA is calling for additional measures to address Canada's chronic affordability and supply problems, such as an overhaul of the GST on new home purchases and greater alignment of the mortgage stress test with market conditions.
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