Housing starts reverse gains as Toronto construction plunges 47%

Housing starts reverse gains as Toronto construction plunges 47%

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The pace of housing starts in Canada slowed 11 percent to 267,055 units in October — led by a 47 percent drop in Toronto — reversing the September surge that had lifted the pace to 298,811 units.

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Data from the Canada Mortgage and Housing Corporation released on Wednesday showed that the total number of city formations at a seasonally adjusted annual rate (SAAR) fell 11 percent to 245,234 in October from 276,142 in September, while multi-unit city formations declined Have slowed 13 percent to 188,189 units from 216,549 units in September. Urban single-family housing starts fell four percent to 57,045 from 59,593 units in September.

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Data from CMHC showed that the six-month trend in launches continued to rise, reaching 277,667 units in October, up 0.5 percent month-on-month.

“In 2022, housing start activity remains elevated in Canada,” CMHC chief economist Bob Dugan said in a press release.

The slowdown in October did not hit all regions and housing types equally.

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Montreal saw a 19 percent increase attributed to multi-unit activity. Over the same period, Vancouver reported a 19 percent drop, pushing the national average lower.

Toronto launches fell a whopping 47 percent, with nearly all of the 52 percent drop coming from the multi-family sector. Many other Ontario markets saw similar slumps in apartment building, including Guelph, which fell 85 percent, and Barrie, down 91 percent.

CMHC economist Dana Senagama said the all-or-nothing aspect of multi-family housing projects can skew numbers in any given month.

“Especially in downtown Toronto you expect 400, 500 units per building. So if any of these projects started digging the ground, we would say… ‘That’s 500 units that started,’ or it would be zero if they didn’t start digging.”

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Although she says this type of volatility is common in the condo market, rising interest rates could also play a role.

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“One thing we’re noticing is that fewer projects are actually starting construction, especially this year,” Senagama said, noting that both potential homeowners and developers looking to borrow money to get construction started can be impacted . “We also see many issues related to labor and/or shortages.”

A home group said it expects housing starts to fall as rising interest rates find their way through the system.

Canadian Home Builders’ Association CEO Kevin Lee said the Bank of Canada’s tightening cycle caused homebuilder sentiment to fall dramatically in the second and third quarters of 2022.

“We knew it was going to be now that we were going to see this decline in housing construction,” Lee said. “We assume that the beginnings will also fall by 2023.”

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