Condo construction slows down through the summer

The Canada Mortgage and Housing Corporation (CMHC) released its national housing starts data for August 2016, announcing that starts trended lower last month due largely to a slowdown in condo construction.

The trend measure for housing starts in August was 195,640 units, down from 201,379 in July. The trend is a six month moving average of seasonally adjusted annual rates (SAAR).

"Housing starts declined in August, as construction of multi-unit dwellings slowed in most regions, led by lower activity in Alberta and Manitoba” says Bob Dugan, CMHC Chief Economist. "However, housing market activity levels remain elevated and this decline in starts is the market's response to increasing levels of supply. Multi-unit inventories are above average in several major markets across the country."

The standalone monthly SAAR for August 2016 was 182,703 units, a decrease from July’s 194,663. Urban starts were down 6.1% to 167,879 units, with multiple urban starts dropping 7.3% to 111,378 and single detached starts falling 3.7% to 56,501.

The Prairies, British Columbia, Ontario, and Atlantic Canada all experienced decreases in housing starts last month. The only area to see an increase was Quebec. Rural starts were estimated at 14,824 units.

Housing starts in Toronto CMA

Housing starts in Toronto Census Metropolitan Area (CMA) trended at 42,103 units in August, down slightly from the 43,331 in July. The standalone SAAR for August was actually higher than the previous month at 40,378 units (39,846 in July).

“Fewer apartment starts this past August are mainly responsible for a slowdown in the overall Toronto housing starts trend, in what has otherwise been a busy construction year,” says Dana Senagama, CMHC Principal Market Analyst for the GTA. “That said, limited resale listings have resulted in more buyers purchasing pre-construction homes – particularly low-rise units for which building has now begun.”

The City of Toronto had the most starts thanks to apartment starts, even though a slowdown in apartment construction was the reason for the lower trend. Brampton had the second most with mostly single and row starts, and Markham was in third with many apartment starts.

How long will the shortage in resale listings last? The new home market can barely support the extra demand, which is causing prices to soar. Housing starts may continue to trend downward if there aren’t enough new units coming to market.