Canadian New Housing Starts Are Rising With Inventory—Bad News For Prices 

Canadian real estate markets that are suddenly well supplied are about to get more inventory. Canada Mortgage and Housing Corporation (CMHC) data shows new housing starts climbed in September 2023. The rise in starts is good news for housing supply, but may not be great news for investors. Existing inventory for sale has climbed to one of the highest levels in decades, pushing home prices lower. Another wave of supply can help to push prices even lower, especially if existing-homes continue this level of absorption. 

Canada Is Seeing More New Homes While Existing-Homes For Sale Rise To Rarely Seen Levels

Canadian new construction started to climb higher. The monthly seasonally adjusted annual rate (SAAR) of units started climbing 8% to 270.5k in September. Multi-unit construction drove the growth, rising 10% to a monthly SAAR of 207.7k units. Single-family units lagged but still improved, rising 3% to a monthly SAAR of 43k units. 

Housing Starts in Canada – All Areas (CNW Group/Canada Mortgage and Housing Corporation (CMHC))

Rising new home starts might apply even more pressure on existing home prices. Despite record population growth, sales for existing homes have been dropping. Available inventory is now at one of the highest levels in years, creating downward pressure. Starts take a while to hit the market, but they’re going to apply further relief down the road.   

Canada’s 3 Major Markets Are Seeing Prices Fall & More Supply May Amplify The Trend

Canada’s Big Three real estate markets are largely seeing a healthy inflow of starts. Montreal (+98%) and Toronto (+20%) both saw aggressive growth in September. Vancouver (-17%) suffered a minor setback, but still remains 37% higher than last year. It may not be a new record high for construction but activity is still significantly elevated compared to pre-pandemic. 

At the same time, these cities have all seen existing-home inventories push prices lower. September saw home prices fall in Montreal (-0.6%), Toronto (-1.3%), and Vancouver (-0.4%). An influx in supply is bad news for the investors that tend to own the majority of new supply coming to market, but good news for home users. 

Canadian new housing starts are back to climbing, and while lower than peak—remain higher than last year. Low rates helped speculators consume a large share of the market, but falling prices have killed the demand. That leaves a gap between the price end users can pay and current home prices. Rising existing home inventories and new supply being finished are likely to help close that gap.