Toronto Homebuilding Stalls As CRE Starts Stay Strong
Two new real estate reports show Toronto's homebuilding industry cooling, even while the city continues to lead the way in commercial real estate starts.
A monthly report from the Canadian Mortgage and Housing Corp. found Canadian home construction was on a pace for its best year since the 2008-2009 recession. Economists had anticipated a cooling effect because of rising interest rates and fears of a housing correction.
“In general, it is a very strong housing market, despite recent policy changes and concerns,” said Dana Senagama, market analysis principal for CMHC in Toronto.
“Overall, the Toronto housing stats trended lower, though still with strong activity throughout," she said.
Work began on 222,324 Canadian homes in July, the third-fastest monthly pace since 2012 and slightly ahead of last year, according to the report. This puts the industry on track for the most new residential construction since 2007 if the current pace continues.
In Toronto, it was a bit more of a mixed bag. Total housing starts in the GTA were lower in July, with apartment and single-detached home starts trending downward. Semi-detached unit starts like townhouses and condos remained strong.
The stats reflect Toronto’s recent rise in housing prices, which appeared to peak this spring.
“Affordability remains a key factor,” Senagama said. “With single-family units, cost is a big issue. So people are looking to more affordable options like condos,"
The CMHC report was supported by a new Statistics Canada report. It showed Canadian permits for single-family residences fell 12.5% in June from the previous month, while multifamily permits increased 12.5%.
The multifamily gains were led by a jump in construction in the country’s three largest urban centers: Toronto, Montreal and Vancouver. New multiple-unit construction was up 9% with 145,543 units in July.
Toronto also helped Ontario lead the way in permits for other commercial real estate development. According to StatsCan, Canadian municipalities issued $3B worth of building permits for non-residential structures in June, up 8.8% from May.
Only Ontario, Quebec and Manitoba registered increases in all three of the non-residential components: industrial, commercial and institutional.
Ontario led the way in commercial and institutional building permits, with gains of nearly $200M. The province was second only to Quebec in industrial gains.
Commercial permits were up 13% to $1.7B. In Ontario, that was driven by increased activity in office and student residences.
Overall, the value of Canadian industrial building permits was up 6.3% to $573.5M in June, a fourth consecutive monthly increase.
Institutional permits increased 2.1% to $749.3M in June, with gains posted in Ontario and three other provinces. The increase was attributed to planned construction of educational structures and hospitals in Ontario.
“[Toronto] is a vibrant economy,” Senagama said. “Job numbers are strong. And the success is encouraging a lot of business.”