New condo and detached house development in major cities helped push Canadian home building to a record high last year.
The number of housing starts rose 21 per cent to 244,025 year over year, according to Canada Mortgage and Housing Corp., marking the highest level of new home construction on record.
Condo and apartment building accounted for about 60 per cent of the new construction, with housing starts climbing in the major metropolitans of Toronto, Vancouver and Montreal, as well as smaller cities such as Halifax, Kitchener, Ont., Ottawa and Winnipeg. Across the country, multiresidential starts climbed 19 per cent to 141,684 units in 2021 from 2020, while detached housing starts jumped 28 per cent to 63,456 units over the same period.
CMHC said the increase was mainly because of the recovery after pandemic measures briefly slowed construction of new homes in the first year of the health crisis. Over all, rental housing starts rose by 26 per cent to 78,746 units year over year.
The unprecedented levels of construction are taking place as home prices spiral upward. The typical price of a resale home in Canada is up 43 per cent in two years, according to the Canadian Real Estate Association’s home price index. Values have jumped across most of the country, especially in less populated regions in B.C. and Ontario. In places such as Hamilton, Guelph, Cambridge and Brantford in Ontario, the home price index is at least $300,000 higher than the end of 2019.
The real estate industry and economists say new housing is needed to help meet demand. But even though housing starts reached a record high in 2021, it is not expected to temper the pace of home price increases.
Rishi Sondhi, an economist with Toronto-Dominion Bank, said the new builds will be helpful “but unlikely to meaningfully slow home price appreciation,” given the low cost of borrowing, population growth, high household savings and a rising price environment motivating people to buy sooner than later.
As well, he said that it is taking longer for developers to complete housing units. “Even as starts ramped up, it will take time for this new supply to hit the markets, as the length required to finish a project is also on the rise.”
Housing starts typically represent earlier demand. Developers break ground after the majority of their units have been sold before construction to ensure that there is demand and financing for the building. Since the pandemic started, buyers have sought houses and bigger properties. But demand is growing for condos given that many buyers have been priced out of the single-family homes and condos are generally cheaper than a house.
Ontario, the country’s most populated province, continued to account for a large chunk of home building.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
Rachelle Younglai