Nearly every government in Canada — at all levels and all political stripes — say they want more houses built. New data from the Canada Mortgage and Housing Corporation (CMHC) shows the opposite is happening.
What happened: Housing starts — the CMHC defines it as the beginning of construction work on a new home — fell 9% in June from the previous month across the country.
- The picture looks even worse when you zoom in on the data: In the country’s most expensive markets, Toronto and Vancouver, starts fell 37% and 13%, respectively.
Why it matters: Canada is already not close to hitting its targets for building enough new homes to meet demand, and now we’re falling further behind.
- The CMHC estimates that around 900,000 homes need to be built every year until 2030 to make housing affordable. Their latest data shows we’re tracking towards 247,205 starts this year.
Why it’s happening: Higher interest rates are the main culprit. They have reduced buyer demand and made it more expensive for builders to borrow money for projects.
- Sales in some categories, like pre-construction condos in Toronto and Vancouver, have been crushed by higher rates, falling to lows not seen since the 2008 recession.
- “There is very little interest from investors for pre-construction condominiums,” Chris Spoke, founder of real estate developer Toronto Standard, told The Peak. “Developers are delaying their launches and even cancelling projects as their pro formas no longer pencil.”
Bottom line: Policymakers are spending plenty of time talking about building more homes, but that’s not translating into shovels in the ground.