The first half of 2023 has unveiled shifts and trends in housing starts within Canada’s 6 largest census metropolitan areas (CMAs), according to the Housing Supply Report. Housing supply in Canada's biggest cities grew by only 1% in the first half of 2023, compared to the same period in 2022.
Factors such as stricter borrowing rules, higher construction and labour costs and increased interest rates posed challenges for developers in all 6 major markets. Additionally, construction times slightly extended by 0.9 months compared to the first half of 2022.
Toronto and Vancouver dominated housing starts, mostly in apartments, making up 66% of new units breaking ground. Meanwhile, other large Canadian cities saw declines in housing starts.
Montréal experienced its most significant decline in residential construction in 26 years. Unlike Toronto and Vancouver, Montréal tends to prioritize small and low-rise apartment structures. These smaller projects require less time for planning and construction. The drop in housing starts in Montréal was, therefore, more reflective of the recent deterioration in financial conditions.
Meanwhile, many apartment projects started in the first half of 2023 in Toronto and Vancouver were financed when macroeconomic and financial conditions were more favourable. As such, elevated construction activity in these cities is not likely to be sustainable due to the various challenges currently facing developers.