Housing Starts

Housing starts have experienced volatility over the past five years. Prior to the period, the global financial crisis dragged down the domestic housing market, and housing starts contracted 7.6% over 2008. As the recession began the following year, housing starts nosedived another 29.4% due to depressed disposable income and rising unemployment. In 2010, housing starts sharply rebounded from recessionary lows, though the overall housing market remained fragile. Housing starts continued to recover through 2012, growing 2.1% in 2011 and 10.8% in 2012. However, the recovery was partly fueled by rising levels of government stimulus and low mortgage rates. Additionally, according to the CMHC, housing market growth from 2010 through 2012 was mostly attributed to the rising level of large multi-unit housing investments, such as rental condominiums and apartments, while single-unit housing starts have remained steady. As large multi-unit housing investments were completed and rental demand declined, housing starts slowed.

In 2013, a drop in multi-unit housing investments after years of record-breaking increases in the country’s condominium stock resulted in a 12.5% decline in housing starts. Housing start growth then remained subdued until 2017, when housing starts increased by 11.0%, as a booming housing market and particularly strong economic expansion raised demand for new homes. However, this has spurred the Canadian government to act. The Bank of Canada has begun raising interest rates in a bid to normalize the economy. Additionally, the Office of the Superintendent of Financial Institutions (OSFI) implemented new stringent mortgage regulations in 2017 and 2018 which have had the effect of making it more difficult for consumers to get approved for high loan-to-value mortgages. When consumers struggle to afford purchasing homes and get denied mortgages, they choose to rent instead, diminishing demand for home building.

In 2020, the rapid onset of the pandemic negatively affected housing starts at the end of Q1 and throughout Q2 as economic uncertainty led to delays in construction projects. However, housing starts still did better than initially expected and many residential construction projects that were initially delayed in Q1 and Q2 began construction in Q3. Furthermore, lower interest rates as a result of the pandemic encouraged residential construction. As a result, housing starts actually increased 4.4% over 2020.The historically accommodative lending environment continued into 2021, even as the economy largely reopened, resulting in housing starts growing an additional 24.5%.

Economic recovery throughout Canada experienced some volatility due to lingering supply constraints and the resurgence of coronavirus cases resulting from the delta variant and other mutations. Additionally, inflation throughout the country has soared to record levels, leading to the Bank of Canada aggressively raising its policy rate throughout 2022. As mortgage rates rose, in reaction to interest rate hikes, housing starts fell 3.4% during the year. With inflation continuing to linger into 2023, rates remained high which resulted in housing starts falling an additional 8.2% during the year. Despite government initiatives to combat housing shortages throughout the country, construction costs, labor shortages and high borrowing costs have plagued progress, limiting housing start growth. As a result, housing starts grew only 2.0% in 2024. IBISWorld expects housing starts in Canada to slow in 2025 due to Ontario's slowdown.