CMHC says Toronto condos lead 20% drop in housing starts
Housing starts in the Toronto census metropolitan area dropped by a greater than expected 20% in August to the lowest number since February of this year, according the Canada Mortgage and Housing Corporation.The seasonally adjusted annual rate of starts was 33,100, down from 41,600 in July. Much of the decline was due to a big drop in the volatile condominium sector.
We are at a mature stage of this housing cycle, according to the CMHC. New construction has remained above average but will decline over the next two years.
CMHC is forecasting that starts will be 40,000 this year, down from 41,596 in 2005 and from the peak in 2003 of 45,475.
CMHC considers a home started once the concrete foundation is poured. Analysts warn that the monthly figures can be volatile because one large project can make a big difference to the monthly figures.
With so many condominiums being built in the Toronto area, the numbers have been up and down all year, making it especially difficult for economists to detect a consistent trend.
Record sales of condos in the first half of the year were expected to have an influence on future numbers because many have not been built yet. However, analysts say a correction may be in the works once they are all built.
Ontario Home Builders’ president Victor Fiume said the association was forecasting a soft landing from the cyclical highs we experienced a few years ago.
The builders also pointed to other factors for the slowdown. Higher interest rates, and the increasing costs of materials and labour have eroded housing affordability over the last year, which have contributed to the moderation in residential construction activity across Ontario.
Still, while the multiple segment in the Toronto area was down by almost 30%, the more stable single-detached segment was down only by 2%. This suggests the market is still healthy, although not as robust as it was, Dunning said.
Toronto’s decline surpassed the national average. Nationally, starts dropped by 9.6%, with multiple starts plummeting to 22% to the lowest rates since October.
In the Toronto area, new-home construction has fallen by 12% to the end of August compared to the same period last year. “Housing starts are below last year’s levels due to more balanced resale market conditions and high home prices for ground-oriented homes,” Mercer said.
Condominium starts, which have accounted for an increasing share of new construction, are down by about 8% for the year.
———————————————————————————
Contact the Jeffrey Team for more information
