Housing Starts in Canada Show Regional Disparities in 2023

The Canadian housing market continues to display regional disparities in 2023, with varying trends in housing starts across major cities. Recent data from the Canada Mortgage and Housing Corporation (CMHC) indicates that while Toronto, Vancouver, and Calgary are experiencing growth in housing starts compared to previous years, Montreal, Ottawa, London, and Hamilton have seen a dramatic decline.

In August, the national trend in housing starts remained relatively flat, with a slight increase of 0.8% from July, totaling 244,507 units. The trend measure, which is a six-month moving average of the monthly seasonally adjusted annual rate (SAAR) of total housing starts, provides a broader perspective on market conditions.

The monthly SAAR of total housing starts for all areas in Canada decreased by 1% in August, with 252,787 units recorded, down from 255,232 units in July. This decline was primarily driven by a decrease in multi-unit urban starts, which dropped by 1% to 191,250 units, while single-detached urban starts increased by 2% to 41,825 units.

Notably, the provincial variations are striking. Ontario and British Columbia stand out as exceptions, with year-to-date housing starts showing positive growth. Toronto and Vancouver have particularly excelled, recording a remarkable 28% and 47% increase in housing starts in 2023 compared to the same period in 2022.

Bob Dugan, CMHC's Chief Economist, commented on the current housing market dynamics: "While both the SAAR and trend in housing starts were flat relative to the previous month, total housing starts are under pressure in 2023, except in Ontario and British Columbia. The one bright spot in Canada has been multi-unit starts which have helped offset significant declines recorded in single-detached starts in all provinces this year. Market intelligence suggests multi-unit projects started during the busy summer months were likely financed a few months prior, so the full effect of higher interest rates on construction activity remains to be seen."

Let's delve into the regional trends in more detail:

Toronto: A Resilient Market

Toronto continues to be a beacon of stability in the Canadian housing market. Housing starts in the city have remained strong throughout 2023, outperforming the national trend. Year-to-date, Toronto's housing starts are up by a substantial 28% compared to the same period in 2022. While total SAAR housing starts were down 20% in August, the city maintains a robust real estate sector.

Toronto is helping to balance the supply picture in Ontario where construction starts have plunged in other cities.

Ottawa, London, and Hamilton: Facing Challenges

Ottawa, London, and Hamilton have faced significant challenges in 2023, with housing starts declining dramatically when compared to the previous three years. These cities are experiencing a notable downturn in their housing markets, and the reasons behind these declines warrant further investigation.

Vancouver: A Tale of Recovery

Vancouver, which faced significant challenges in its housing market in recent years, has made an impressive comeback in 2023. Year-to-date housing starts in Vancouver have surged by an astounding 47% compared to the previous year. However, there was a 12% decline in total SAAR housing starts in August, indicating potential future challenges for the market. Even if starts are weak for the remainder of 2023, the year will still end with more starts than in any of the previous three years.

Calgary: Riding High

Calgary is another city that has seen positive growth in housing starts this year. Although not as remarkable as Toronto and Vancouver, Calgary's housing starts have increased, contributing to the regional differences in Canada's real estate landscape. Calgary is on pace to outperform 2022, but it’s a neck and neck race.

Montreal: A Surprising Collapse

In contrast to the trends seen in Toronto and Vancouver, Montreal has experienced a surprising downturn in its housing market. In August, Montreal recorded a remarkable 41% increase in housing starts, largely driven by a substantial 48% increase in multi-unit projects. However, despite the recent upswing, year-to-date figures still show a huge decline in housing starts.

Victoria and Edmonton: Consistent Trends

Victoria and Edmonton have maintained consistent trends in housing starts, in line with past performance. While not experiencing the dramatic surges seen in Toronto and Vancouver, these cities have not faced the steep declines observed in Montreal, Ottawa, London, and Hamilton.

The Big Picture

The Canadian housing market remains a complex landscape with varying regional trends. While Toronto and Vancouver lead the way in terms of growth, other cities are grappling with challenges that have resulted in significant declines in housing starts. The factors driving these regional disparities are multifaceted, encompassing economic conditions, interest rates, government policies, and post-COVID rebalancing of local demand.

As we move forward in 2023, the housing market in Canada will continue to evolve, and stakeholders will closely monitor these regional differences to make informed decisions in the ever-changing real estate sector.