Tight resale market driving London buyers to purchase preconstruction
By Newinhomes on May 17, 2018
Earlier this month, the Canada Mortgage and Housing Corporation (CMHC) released its housing starts figures for April 2018, reporting construction activity held steady month-to-month.
On a national level, housing starts trended at 225,696 units in April, basically unchanged from the 226,942 in March. The trend is a six month moving average of seasonally adjusted annual rates (SAAR).
“In April, the national trend in housing starts remained stable at historically elevated levels, with lower starts of single-detached dwellings offsetting higher starts of multi-unit dwellings,” says Bob Dugan, CMHC’s Chief Economist. “Notably, the national inventory of newly completed and unabsorbed multi-unit dwellings has been stable over the same period, indicating that demand for this type of unit has absorbed increased supply.”
London is a perfect example of the strong pace of multi-unit construction. Housing starts trended higher for the first time in five months in April, mostly due to rental apartment developments breaking ground. There were also signs of more detached and townhome starts due to a tight resale market driving demand to the preconstruction market.
In Toronto Census Metropolitan Area (CMA), housing starts remained unchanged from month to month. The high prices of new single-family homes led to fewer starts, while the demand strengthened for condos as the affordable alternative. In the first quarter of 2018, there were more multi-unit starts reported than in any other quarter for the last four decades.
2017 was a big year for new condo sales, so some of those projects are breaking ground this year, and condo units remain relatively affordable compared to a new single-family home, which averages more than $1.2 million in the Greater Toronto Area (GTA).
The CMHC also highlighted Kingston because its housing starts trended higher with detached homes and multi-unit dwellings, including rentals. April was the third consecutive month that rental starts trended higher. The demand for rental is fueled by students and the aging population. Kingston’s vacancy rate was 0.7%, the lowest of 16 CMAs in Ontario.
The standalone SAAR of housing starts in April 2018 was 214,379 units, which is lower than the 225,459 in March. The SAAR of urban starts dropped 4.7% to 198,090 units, with multi-unit starts falling 2.7% to 141,032 and detached starts decreasing by 9.3% to 57,058. Rural starts are estimated at 16,289.
