Housing starts in Canada's major cities: A mid-2023 overview

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(Visual: Government of Canada logo, and CMHC logo fade in together. A series of images featuring housing construction across Canada.)

(Visual: Two people are shown in conversation. They sit across from one another at a boardroom table. The two individuals are Christelle Legault, Communications & Marketing, CMHC, and Kevin Hughes, Deputy Chief Economist, CMHC.)

00:00:02
CHRISTELLE: Hello! My name is Christelle Legault and I’m pleased to be hosting the discussion today about our latest housing supply report. Housing supply is top of mind these days as all levels of government struggle to come up with solutions to address Canada’s housing crisis. CMHC’s Housing Supply Report specifically looks at new residential construction trends in Canada’s 6 biggest markets. Joining me today to dive deeper into this report and its findings is our deputy chief economist, Kevin Hugues. Hi Kevin and welcome.

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00:00:31
KEVIN: Thank you.

00:00:32
CHRISTELLE: So, let’s talk about this report. Why is it important?

00:00:36
KEVIN: It’s important for the simple fact that as you stated before, housing is on everyone’s minds today. There’s a lot of people saying a lot of things about housing and what we’ve always done at CMHC through our starts and completion survey is collect the data to give a correct accurate picture of what’s going on presently and I think that any discussion about you know, future policies, programs has to be based on a very good picture of where we are and that’s why we’re here today.

00:01:07
CHRISTELLE: That’s great, thank you. So based on this latest report, what are the first 6 months of 2023 telling us and how does this compare to this time last year?

00:01:17
KEVIN: From a national perspective, the situation hasn’t changed very much because the total amount of starts is very similar to that of the first 6 months of the previous year but as usual when we break this down through provinces and regions, we see some differences. So in Toronto and Vancouver, starts did show a big increase whereas in other areas you know, Montreal for example, there have been declines and we see this all the time you know, when you go down to the local level because housing markets are you know, local phenomenon, this is quite normal so this is kind of what we’re seeing for the first 6 months.

00:01:55
CHRISTELLE: Ok and you mentioned some interesting kind of shifts. So, Toronto and Vancouver we’re seeing decades high levels of housing starts in these 2 big cities while Montreal we’re seeing quite a drastic drop, about 60%. Can you explain what’s going on there?

00:02:12
KEVIN: Yeah, the main difference is that in the case of Vancouver and Toronto, we’re actually having data today that is kind of telling a story that started basically 2 years ago you know, when projects were being you know, mulled around you know, and land needed to be developed. Pre-sales of condos had to reach a certain level, financing was not what it is today which is harder so these projects you only have like a number of projects that coincided and you know, we saw some numbers that were quite high for those 2 CMAs. In Montreal where the nature of construction is like lower rise, it’s multi families apartments but they’re not as high density as in those other cities, that’s more reflective of the present conditions which are you know, there’s a lot of head fronts as we know, headwinds rather, and we can list a few of them: labour shortages, the cost of materials, financing which is much more difficult than 12 months ago and this I think Montreal is probably a better barometer if you wish to give us an indication of you know, the sign of the times in rental construction.

00:03:26
CHRISTELLE: Interesting. And in the report, we also state that three-quarters of housing starts were apartments or purpose-built rental buildings which is a very good shift in terms of you know, putting more supply in the market but why are developers moving towards this type of dwelling and why this shift and this kind of uptake of that type of dwelling?

00:03:47
KEVIN: Yeah. Certainly, the move towards purpose-built rentals is something that has definitely caught everyone’s attention, our attention. Why?  Because for so many years, this has been a market segment that has been you know, wanting for more development and you know, at CMHC we have you know, our analysts, economists who are very connected in the local markets when you talk to the industry and you know, traditionally the message that we’ve always received is that you know, the incentives, the margins were simply not there for rental construction. So, when we see numbers like this for purpose built rental, it's I think an encouraging sign but I think we want to know what the nature of that rental is. It’s probably upper middle, upper scale so that is obviously you know, adding supply which is something that I think is needed, we definitely think is needed. We want to know maybe more about you know, is it high rental and what would be the impact on the more affordable rental, which is also you know, a preoccupation in this country.

00:04:51
CHRISTELLE: Ok. And I imagine the federal government’s latest announcement on the GST rebate for apartment buildings will certainly help with that trend going forward. Do you think that this is enough though to move projects forward, some that may have been put on pause, do you think that this is going to help?

00:05:08
KEVIN: Well, what I would say is that when you ask if it’s enough, I mean we just published last week our you know, update of our housing gap supplier report and in that update, you know, we have again come up with 3.5 million units that need to be build in addition to. So, one could say you know, that’s a lot of housing and the government cannot by itself do that so the announcement of the GST is definitely something that is to be encouraged and it will be part of that solution. What is important to underline here is that it’s part of that solution, we need other players around the table, we need the private industry, and we also need a lot of creativity and innovation so it definitely is definitely in the right direction, more is needed from everyone.

00:06:01
CHRISTELLE: Thank you. And last question, so in the previous report released earlier this year, we mentioned that the inventory of unabsorbed or the unabsorbed inventory rather, was at an all-time low. However, our latest report is showing that unabsorbed inventory went up about to 25%. Is this a cause for concern?

00:06:23
KEVIN: So, the statistics on like you know, the stock that it’s unabsorbed, we see this all the time. You know, when a few projects are started and completed, it takes time for that absorption even though the general context is that housing demand is quite strong across the country. So no, that will finish by being absorbed, it’s just a question of you know, the timing really.

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00:06:47
CHRISTELLE: Thank you very much Kevin. These are some valuable insights in the latest housing supply trends. And thank you to our listeners today. Please see the description below for a full copy of the report. Feel free to leave a comment with your feedback on the report and this discussion and stay tuned for more conversations with our housing experts. Please also be sure to subscribe to our CMHC newsletter and our social media channels. Thank you.

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