London housing starts surge due to affordability issues in Toronto
By Lucas on Aug 09, 2017
The Canada Mortgage and Housing Corporation (CMHC) released its housing starts report for July 2017, announcing a trend increase, no thanks to Toronto.
In July 2017, national housing starts trended at 217,550 units, up from the 215,175 in June. The slightly higher trend is thanks to an increase in starts in British Columbia and Alberta. The trend is a six month moving average of seasonally adjusted annual rates (SAAR).
“In July, Canada’s pace in housing construction ramped up for a seventh consecutive month,” says Bob Dugan, CMHC’s chief economist. “British Columbia and Alberta were the main contributors to the higher trend in housing starts. While BC’s construction coincides with near-record low completed and unsold units in the past few months, Alberta’s inventory of new unsold homes is ramping up, highlighting the need for managing inventories.”
Calgary in particular saw a strong increase in housing starts, getting closer to the historical average. Calgary had a slow start to the year, but multiple starts are up, even though inventories are close to record highs. If this pace continues, Calgary may be at risk of overbuilding. According to CMHC, Calgary is already at a moderate risk of doing so.
In Toronto, starts trended lower due to a drop in multiple and single detached starts. The lower trend still brings Toronto close to the average for the year. CMHC reported a strong increase in semi and townhome starts, a consequence of affordability issues in the city. But, the Building Industry and Land Development Association (BILD) also reported record high new condo sales in June, so expect Toronto housing starts to trend up again soon.
Another consequence of high housing prices in Toronto was an increase in housing starts in London. This July had the most single detached starts since July 2007. Aside from Greater Toronto Area (GTA) buyers in search of affordable housing options, there is also some spillover from the resale market in London.
One more thing we want to point out from CMHC’s report is that Ottawa had a big increase in housing starts, mostly driven by rental apartment starts, which were 1.5 times higher than the same period last year. It’s interesting that rental construction is up while there are many completed unsold condo units on the market. Ottawa is also at a moderate risk of overbuilding.
The standalone monthly SAAR for all of Canada was 222,324 units, up from 212,948 in June. The SAAR of urban starts increased by 5.5% to 206,122 units. Multiple starts jumped 10.4% to 141,950 units and single detached starts fell 3.9% to 64,172. Rural starts are estimated around 16,202.
