Analyzing Canada’s Housing Supply Landscape: Insights from CMHC’s Latest Report

The Canadian housing market is undergoing significant changes, influenced by rising economic uncertainties, inflation, and developer sentiment. Tania Bourassa-Ochoa, deputy chief economist at the Canada Mortgage and Housing Corporation (CMHC), recently shared her insights during an interview with BNN Bloomberg regarding the findings from their latest housing supply report.

Overview of the Housing Supply Report

The CMHC’s fall housing supply report reveals a flat growth in overall housing starts during the first half of 2023 compared to the previous year. While specific markets, including Calgary, Edmonton, and Ottawa, have seen increases in housing starts, major urban centers such as Toronto, Vancouver, and Halifax have reported declines. This mixed performance highlights the uneven recovery of housing across different regions in Canada.

Developer Sentiment and Economic Challenges

According to Bourassa-Ochoa, a pervasive sense of pessimism among developers has become apparent, driven primarily by economic uncertainty and inflationary pressures. The skyrocketing costs of construction materials, exacerbated by trade issues and tariffs, have further clouded the outlook for new housing projects. “We’re seeing a little bit of that pessimism show up quite significantly,” she stated, underscoring the challenges that developers face in the current economic climate.

The Shift in Housing Starts: A Closer Look

The report highlights a stark contrast in housing trends among the provinces. While Calgary, Edmonton, and Ottawa experience growth, the activity in Toronto is particularly concerning. The CMHC noted that Toronto is on track for its lowest housing starts in 30 years, with a dramatic 60 percent decline in condominium projects attributed to previous high demands during the pandemic followed by a drastic market correction. Bourassa-Ochoa explained that many investors are sidestepping the condo space, as reduced immigration and high-interest rates make the market less attractive for profit-driven investors.

In stark contrast, purpose-built rental starts saw an impressive surge, spurred on by concerted government efforts and a noteworthy shift among developers toward the rental market. Bourassa-Ochoa remarked, “There’s a lot of efforts that are being deployed in order to push more of that purpose-built rental construction,” recognizing the increasing demand for rental accommodations amidst evolving housing needs.

Regional Highlights: Toronto, Montreal, and Vancouver

Toronto: A Record Low in Housing Starts

As the CMHC indicates, Toronto’s homebuilding activity has dropped to its lowest level since 1996 on a per-capita basis. The decline in housing starts, driven mainly by a slowdown in the condo market, is reflective of broader concerns about financing and demand. Developers are increasingly postponing launches, leading to project delays and a reduction in land acquisitions. The forecast for recovery remains tempered, with little change expected until 2026 and 2027.

Montreal: Modest Growth Expected

In contrast, Montreal’s housing starts saw an uptick in the first half of 2023, primarily due to a solid focus on purpose-built rentals, with expectations of modest growth moving forward. Current market momentum appears to remain stable, despite challenges in the downtown area. Developers have shifted their focus to suburban projects, adapting to the changing landscape and seizing new opportunities.

Vancouver: Cautious Optimism for the Future

Vancouver experienced a decline in housing starts as well but is projected to improve gradually by 2026. Bourassa-Ochoa noted that, while the immediate outlook for housing starts in Vancouver may seem bleak, there is a sense of optimism as the region anticipates better market conditions in the future. Local governments have been proactive, amending zoning policies and development timelines to ease housing delivery, ultimately aiming to boost the housing supply.

Conclusion

The CMHC’s latest housing supply report paints a complex picture of Canada’s housing market, where regional disparities are pronounced amid broader economic challenges. With an ongoing focus on purpose-built rentals and governmental support in various markets, there is cautious optimism for recovery in certain regions. However, the road ahead remains uncertain, and how developers adapt to shifting dynamics will be crucial in shaping the future of Canada’s housing landscape.

As Tania Bourassa-Ochoa aptly summarized, addressing the challenges will require concerted efforts from all stakeholders, including policymakers, developers, and the community at large. The future of housing supply in Canada will depend on navigating these challenges effectively, fostering an environment that encourages innovation and responsiveness to community needs.

With files from the Canadian Press