Canadian New Home Starts Remain High But Have Cratered In Toronto

Canadian new home starts are still strong but have begun to slow down from highs. Canada Mortgage and Housing Corporation (CMHC) data shows housing starts climbed in April. The rise in starts is based on seasonally adjusted month-to-month data, though. The number of new homes remains historically high but annual growth is tapering.

Canadian New Home Starts Are Making A Seasonal Climb Higher

The trend, a 6-month moving average of the seasonally adjusted annual rate (SAAR), climbed in April. The trend of new home starts reached 257,800 units in April, up 1.8% from a month before. The trend is the agency’s preferred measure, since it minimizes volatility. However, both a moving average and SAAR minimizes month-to-month fluctuations. Applying both can minimize and make trends slow to respond. 

The “standalone,” not a moving average, shows more starts but trending lower from last year. The SAAR reached 267,300 in April, up 8.0% from the month before. Compared to the previous year, starts have fallen 3.1% lower — not a substantial drop, but still lower. In any case, the number of starts remains higher than usual.

Canadian New Housing Starts

The seasonally adjusted annual rate of new housing starts across Canada.

Source: CMHC; Better Dwelling.

“On a trend and monthly SAAR basis, the level of housing starts activity in Canada remains historically high, hovering well above 200,000 units since June 2020 and increased from March to April,” said Bob Dugan, CMHC’s Chief Economist.

He adds, “The increase in monthly SAAR housing starts in Canada’s urban areas was driven by higher multi-unit and single-detached starts in April. Among Montreal, Toronto and Vancouver, Toronto was the only market to post a decrease in total SAAR starts, which was driven by lower multi-unit and single-detached starts.”

Toronto New Home Starts Fell Sharply, But Was Tapering Before

Greater Toronto’s new home starts showed a sharp drop, isolating itself from the other Big Three. The SAAR reached 24,600 new units in April, down 37.7% from the month before. Compared to last year, the number was 26.4% lower. It’s a sharp decline in activity, regardless of how it’s cut. One reason for the drop, not mentioned by the CMHC, is labor disruptions in Greater Toronto.

In May, most of Greater Toronto’s skilled trades for homebuilding went on strike. Combined with higher rates, developers likely hit the pause button on new home starts. The strike is limited to 6 weeks in Ontario, so the disruption isn’t expected to drag on for too long. The strike began in May, but some projects were likely delayed in anticipation.

Canada’s new home starts are still strong, especially compared to pre-2020 activity. Even with a hiccup in its largest real estate market, new building is historically high. However, there is tapering as activity normalizes from record levels.