In a climate of dismal housing supply reports and headlines, there’s some positive news on Canada’s housing starts front. After two months of declining figures, the pace of the country’s housing starts increased 10% in May from April, according to Canada Mortgage and Housing Corporation (CMHC). This marks the highest level Canada has seen in seven months.
The total monthly seasonally adjusted annual rate (SAAR) of housing starts for all areas across the country increased by 264,506 units in May, compared to 241,111 units in April, says CMHC. The six-month trend in housing starts – a six-month moving average of the SAAR of total housing starts for all areas in Canada – increased 3.8% from 238,859 units in April to 247,830 units in May.
According to CMHC, the actual number of housing starts in Canadian urban centres of 10,000 residents or more was up 39% to 21,652 units in May, compared to 15,606 units in May 2023. The year-over-year increase was driven by higher multi-unit starts, which were up 49%, and higher single-detached starts, which were up 6%. Meanwhile, the monthly SAAR of total urban housing starts was 11% higher, at 246, 141 units recorded. Multi-unit urban starts increased 13% to 203,141 units, while single-detached urban starts increased 2% to 42,970 units.
Housing Starts Trendline Up Again, But Sluggish Sales Will Soon Have A Negative Impact
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According to the report, May's total actual housing starts were higher in two of Canada's three major cities, with a supply-strapped Toronto up 26% and Montréal up 200% compared to May 2023. Meanwhile, Vancouver’s housing starts declined 13%. CMHC says that Montreal’s notable jump in starts was driven by a 59% increase in single-detached starts and a 218% increase in multi-unit starts compared to May 2023. Total SAAR housing starts were up 104% in Montréal, something that was driven by a 106% increase in multi-unit starts, says CMHC. Vancouver declined 32%, due to decreases in multi-unit starts. Its notoriously pricey counterpart Toronto increased 47% with multi-unit starts higher.
"The focus for homebuilders remains on multi-unit construction in Canada's major centres, as both the SAAR and trend of housing starts increased in May, following two consecutive months of decline,” said Bob Dugan, CMHC's Chief Economist in the report. “This was due to growth in actual year-over-year starts, driven by significantly higher multi-unit starts, particularly in Montréal and Québec. While this is good news for housing supply, we do expect downward pressure on starts through the rest of 2024.”
Factors like perpetually high interest rates, sky-high construction costs, and dramatic new increases in development fees in cities like Toronto currently pose challenges to the much-touted notion that we need to “get shovels in the ground” and build homes quickly. So, while we can't say we'd bet on these housing start figures continuing to increase as we move further into the year, today's stats are undoubtedly welcome news for many.
"Considering the immense challenges facing Canadian home builders, May’s increase in housing starts verges on the miraculous," said NerdWallet Canada spokesperson and real estate financial expert, Clay Jarvis. "We’re still light years away from meeting the housing targets set out by the CMHC, but May’s starts data is a welcome step in the right direction. Maintaining any kind of building momentum is going to be tough. Developers are stuck paying high interest rates and construction costs, but there’s a harsh financial reality facing municipalities, too: paying for the infrastructure required to support new housing developments."
