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According to CMHC, the increase in housing construction in Toronto and Vancouver is unlikely to continue
Published on Oct 5, 2023 • 3 minutes reading time
A low-rise condominium building is being built in Coquitlam, BC Photo by Darryl Dyck/The Canadian Press Files
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A surge in housing construction has helped Canada’s major cities record a one per cent increase in housing starts in the first half of 2023. But higher financing and construction costs could suggest a slowdown is coming, the country’s national housing agency said.
According to the Canada Mortgage and Housing Corp.’s semi-annual Housing Supply Report (HSR). (CMHC), launches in the country’s two largest markets, Toronto and Vancouver, rose 32 percent and 49 percent, respectively, to 25,768 and 17,458 units in the first half.
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Apartments dominated these numbers, accounting for almost three-quarters of all new construction projects. Toronto also saw a resurgence in new home construction, reaching its highest level in decades and contributing more to overall growth in new apartment construction than condominium construction. Meanwhile, Vancouver’s housing boom was fueled by new condo construction, up 91 per cent from 2022.
However, strong growth in the two largest markets was offset by declines in Canada’s other primary centers. Specifically, total housing construction in Montreal and Edmonton fell by 57 percent and 38 percent, respectively.
CMHC deputy chief Kevin Hughes said the discrepancy was likely due to longer project lead times in Toronto and Vancouver.
“Given the larger building size and resulting longer preparation time of the buildings begun in Toronto and Vancouver, the figures released in these cities are the result of a process that began at a time when financing and construction conditions were significantly more favorable,” Hughes said Press release on the report. “This is in contrast to Montreal, which better reflects the current, more challenging context.”
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In the report, the agency said it expects a slowdown in Toronto and Vancouver later this year due to rising material, labor and financing costs.
“In 2023, construction cost growth has slowed to varying degrees across all major centers, but remains elevated in Toronto and Vancouver…” In contrast, growth has slowed much more in centers with stable or declining starts,” it said in the report.
“Right now with inflation it’s really a lot harder for people to get their financing, so there will likely be delays on several projects,” Hughes said. “Funding is one of the problems, but not the only one.”
The report follows a series of measures taken by the Federal Government to support increased housing supply. On September 26, the Treasury Department announced that the annual cap on Canada Mortgage Bonds would be raised from $40 billion to a potential $60 billion. This move is intended to reassure builders that more low-cost financing will be available, particularly for rental projects.
The increase came on the heels of a legislative move on September 21 to waive the federal component of the goods and services tax (GST) for new dedicated rental housing projects.
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Earlier this month, CMHC announced that at least $1 trillion in investment is needed to make housing affordable in Canada, and last month the agency confirmed that Canada still needs about 3.5 million additional homes on top of current construction rates to close the affordability gap by 2030.
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Hughes said that despite recently introduced measures, governments alone cannot tackle the issue of affordability alone.
“There needs to be participation at all levels,” he said.
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