Housing Starts Flat in Canada’s 6 Major Markets During the First Six Months of 2023

The Canada Mortgage and Housing Corporation (CMHC) released on Thursday (10-5-23) its Housing Supply Report. The report examines new housing construction trends in Canada’s six largest census metropolitan areas (CMAs). According to the report, during the first 6 months of 2023, housing supply in Canada’s biggest cities grew by only 1% compared to the same period in 2022.

CMHC notes that stricter borrowing rules, higher construction and labor costs, and increased interest rates all posed challenges for developers. Additionally, the report points out construction times extended by 0.9 months when compared to the first half of 2022.

Toronto and Vancouver dominated housing starts in the first half of 2023, mostly in apartments, making up 66% of new units breaking ground. Meanwhile, other large Canadian cities saw declines in housing starts. Montréal experienced its most significant decline in residential construction in 26 years. Montréal, unlike Toronto and Vancouver, tends to prioritize small and low-rise apartment structures. CMHC notes that these smaller projects take less time for planning and construction; therefore, the drop in housing starts in Montréal was more reflective of the recent deterioration in financial conditions.

CMHC points out that many of the apartment projects started in the first half of 2023 in Toronto and Vancouver were financed when macroeconomic and financial conditions were more favorable. As such, elevated construction activity these cities is not likely to be sustainable due to the various challenges currently facing developers.