Housing starts could fall 32 per cent this year: CMHC
May 3, 2023
New home construction in Canada could fall by nearly a third (32 per cent) this year compared to 2022 and may not see a recovery until 2025, according to the spring Housing Market Outlook 2023 from Canada Mortgage and Housing Corp.(CMHC)
CMHC says Canada-wide residential starts could fall as low as 176,890 units this year, down from 261,849 in 2022.
Its base case scenario calls for a 19 per cent decrease in starts across the country—provided interest rates remain stable and the economy does not sink into a recession. Under this scenario, more than 211,000 new homes would start in 2023.
“We expect housing starts to see a significant decline in 2023, due to constraints in new construction. These include labour shortages and elevated costs of materials in the construction sector, combined with higher project financing costs from increased interest rates,” said Gustavo Durango, CMHC senior economist, market insights.
Montreal housing starts will slip to 21,500 in 2023, down from 24,295 in 2022 under CMHC’s best case projection.
Greater Toronto housing starts will fall in 2023 and then increase in 2024 and 2025, according to CMHC. This year, under the high projection, starts in Canada’s biggest city will reach 33,500—down from 45,109 in 2022.
The three Prairie provinces will outperform, with the federal housing agency forecasting “a much smaller housing start decline” as compared to the national average.
Calgary, for example, is forecast to see a total of 17,400 starts this year, up about 100 units from 2022 in the largest Prairie city.
CMHC say this due to positive impact from high interprovincial migration from other regions over the forecast period, relatively healthy ownership affordability due to relatively low home prices, a generally stronger economic outlook on the Prairies.
CMHC’s outlook for a “sharp decline” in B.C. housing starts this year, however, defies the current construction pace in the province’s biggest market. In the first quarter of 2023, 7,318 new homes started in Metro Vancouver—up nearly 70 per cent from the same period last year, according to CMHC’s own data.
Still, CMHC sees Vancouver area starts declining in 2023 with a worst-case scenario of just 18,700 new units and a best case of 26,100, compared to 25,983 new home starts in 2022. “Starts will fall because developers face a shrinking customer base for condominiums, in addition to elevated construction and financing costs,” said Branden Batch, CMHC senior analyst in Vancouver.