Canada’s real estate developers are pushing forward despite less-than-ideal conditions. CMHC data reveals June housing starts made the biggest jump in a decade. Even with the jump, the general trend has been fewer housing starts, despite the booming population growth. At least one of Canada’s largest banks has stated the country’s goal to double output of new homes is unrealistic.
Canadian Housing Starts Saw The Biggest Jump In A Decade
Canadian housing starts are ripping higher once again, despite rising interest rates. Monthly seasonally adjusted annual rate (SAAR) of housing starts climbed 41% to 281k units in June. It was the largest monthly increase in the past 10 years, according to the agency.
Source: BMO.
“Keep in mind that this follows a sluggish first five months of the year, when starts fell notably to average 226k,” explained Robert Kavcic, an economist at BMO.
Adding, “Even that is still historically a strong run rate for building activity, but less so when set against population growth of more than 1 million people.”
New Home Construction Slowed And Government Targets Are Unrealistic
Canada has generally seen new housing starts slow from the overstimulated-market peak. According to Kavcic’s analysis, starts averaged 235k units in the first half of 2023. Starts remain elevated compared to pre-2020 volumes, but they’re also down from 263k in 2022, and 274k in 2021.
“Yes, this slowing trend flies in the face of government targets to double the rate of construction, but let’s just say we’ve never deemed those targets to be realistic, for a number of reasons (think capacity constraints and market conditions),” explained Kavcic.
BMO previously balked at the government’s targets to double the amount of building. A lack of skilled labor is certainly a challenge, and the one policymakers are focused on—but far from the only issue. By scaling demand for homebuilding, input costs rise, making affordability even more challenging.
Canada’s new construction market saw a massive investor-driven boom with low rates. The demand from investors was so high, they even began to replace first-time buyers for market share. As interest rates normalize and home price growth moderates, qualified demand is shrinking despite the population boom.
Very few immigrants coming here can afford a house or even rent Canada attracts destitute people.
Where is this BS coming from. I work for a big builder and they only sold 6 houses in the last year. Stuff we’re doing now was sold 2 to 3 years ago and the contracts have to be fulfilled. Some of the people who are waiting on their homes can’t even qualify for the mortgage. I don’t believe whatever is being said.
Ray these starts were most likely sold in 2020 and 2021. As you noted what we are starting to build now was purchased 2 to 3 years ago.
Building will lag demand.
Like car sales and everything else. What is being delivered or built today was sold months or years ago in many cases.
Canada wouldn’t have to “double output of new homes” if the government would act to rein in money launderers and speculators.
Can there be an edit to correct every instance where “stats” came up as “staRts”. It does not make it a smooth reading when your brain has to compensate for that typo.
This article would sound more credible if was to focus on number of mortgage denials due to rising interest rates
More credible if they included a statistic that doesn’t exist, and means nothing in this context? One day BMO will be as credible as Robert W, anonymous commenter extrodinaire.
I wish there was a like button for Ray’s comment.