Canada annual housing starts down 7% across the country in 2023

The GTA saw a slight increase in housing starts, driven largely by condos, but only because of a lag in the impact of interest rates locally, according to the latest figures from the Canada Mortgage and Housing Corporation (CMHC).

“We’re just not seeing the supply built that we need,” said economist Mike Moffatt, blaming higher interest rates and a weak economy. “And it’s a real problem.”

Actual annual housing starts were down seven per cent across the country in 2023 compared to 2022, to 223,513, but were up five per cent in the GTA to 47,428.

By year’s end, however, the monthly GTA numbers started to fall. The seasonally adjusted annual rates for November to December of 2023 showed GTA housing starts down 35 per cent to 17,619 from 26,901, and down 75 per cent in December 2023 from a year prior to 1,436.

Anthony Passarelli, a GTA analyst for the CMHC, called the lack of new homes being built “concerning.”

A lot of the GTA’s housing starts that contributed to the five per cent increase were projects that “sold well before the interest rate hikes,” he added.

They are mainly multi-unit homes, a category that includes rental apartments and condos, but in the region the “vast majority” are condos.

 

 

“In the last few months of the year the housing starts activity is starting to reflect this post interest rate hike demand,” he said.

This took longer to show up in the GTA and particularly Toronto, because in general developments take longer to get shovels in the ground, due to delays in city approvals and a longer construction period than in other places, Passarelli added.

“We’re not going to see 2024 look like 2023 that’s for sure,” he added.

“Because you’re just starting to see what the drop off in demand was in terms of construction at the end of last year.”

Moffatt added that many buyers are also still on the sidelines, whether they are looking to live in a unit but can’t qualify for a mortgage at such high rates, or “over-leveraged” investors.

“It’s really ratcheted down demand,” he said.

Across the province, actual starts were also down seven per cent to 85,770 in 2023.

The drop comes as the province has set ambitious housing targets of 150,000 homes a year to reach 1.5 million new homes in a decade.

Both the province and the feds have rolled out policies aimed at encouraging more supply, like money for local housing accelerator funds and tax incentives for new rental buildings.

 

 

But “until the interest rates start to come down” many developers are holding off on new projects, Passarelli said.

Murtaza Haider, a professor at the Ted Rogers School of Management, said the actual yearly starts are the most reliable, because those figures are not manipulated, and things can change month-to-month based on many factors, like strikes or train derailments that can slow down supply of goods.

But he still doesn’t think the “moderate” increase in housing starts in the GTA of five per cent, is anywhere near enough.

It should be more 30 per cent given the housing affordability crisis. And whatever different levels of government have done so far it’s “not moving the needle” on new construction.

“I don’t see these numbers are reflecting the urgency that should have been there,” he said.

“The increase in rents and prices is not in step with the increase in housing construction.”

 

This article was reported by The Star