Despite a temporary pause in the Canadian real estate market in February and March, the nation’s housing sector has been on a tear. Sales activity has been surging, prices are touching all-time highs, demand is booming, and supply is shrinking. When you factor in the Bank of Canada’s (BoC) historically low interest rates and the diligent work of real estate agents, it is easy to understand the extraordinary activity level coast to coast.
Because of these bullish trends, homebuilders are taking advantage of the situation at hand. Since most construction projects have been spared the worst of the pandemic, homebuilder activity has maintained its record-setting strength throughout the public health crisis. And this is occurring amid the worst economic downturn since the Great Depression, generating discussion that the Canadian real estate industry is immune to the public health crisis.
Although housing starts experienced a double-digit decline in September, the broader demand trends and the continuation of permit approvals suggest that overall resilience in this category will persist. Let’s take a deeper dive in the numbers.
Canada Real Estate: Cites with the Most Home Starts Country-Wide
According to the Canada Mortgage and Housing Corporation (CMHC), September housing starts declined at an annual pace of 20 per cent from August. CMHC reported that the seasonally adjusted annual rate of housing starts in September was 208,980 units, down from 261,547 units in August. The market had penciled in a year-over-year rate of 240,000 starts. It should be noted that the figure is in line with average readings from last year.
At the same time, the six-month moving average of the monthly seasonally adjusted annualised pace of housing starts edged up from 212,609 in August to 214,647 in September. in the third quarter, housing starts averaged a little more than 237,300 units, up 22.2 per cent from 194,100 units in the April-to-June period.
“The national trend in housing starts was largely unchanged in September,” said Bob Dugan, CMHC’s chief economist, in a news release. “We expect national starts to trend lower by the end of 2020 as a result of the negative impact of COVID-19 on economic and housing indicators.”
Here are some of the key findings from the September report:
- Annual pace of urban starts tumbled 21.1 per cent to 195,909 units.
- The pace of urban starts of apartments, condominiums, and other multi-unit housing projects slipped by 27 per cent to 147,005 units.
- Single-detached urban starts jumped 3//.4 per cent to 49,904.
- Rural starts came in at a seasonally adjusted annualised rate of 13,071 units.
When it comes to activity across each province, homebuilder activity slumped in Ontario, British Columbia, and Quebec. In the Prairie region, the increase in Alberta housing starts offset the losses in Saskatchewan and Manitoba. Atlantic Canada witnessed declines except for Nova Scotia.
TD economist Rishi Sondhi wrote in a research note, according to CTV News, that previous pre-construction sales and low interest rates will support the market in the near-term.
“Moving forward, past pre-construction sales gains and low rates should ensure that starts remain elevated through next year,” Sondhi stated. “Afterwards, some slowing may take place as softer population growth brought upon by the pandemic weighs on housing demand, and ultimately, homebuilding.”
Here are some noteworthy housing starts data from the monthly CMHC report (year-to-date 2020):
#1 Toronto, ON
- Starts: 30,085
- Completions: 23,471
- Total Absorptions: 21,525
#2 Vancouver, British Columbia
- Starts: 16,179
- Completions: 18,474
- Total Absorptions: 14,224
#3 Montreal, Quebec
- Starts: 19,293
- Completions: 17,553
- Total Absorptions: 8,336
#4 Edmonton, Alberta
- Starts: 7,653
- Completions: 8,429
- Total Absorptions: 6,543
#5 Hamilton, Ontario
- Starts: 2,360
- Completions: 2,080
- Total Absorptions: 1,666
#6 Saskatoon, Saskatchewan
- Starts: 1,468
- Completions: 1,136
- Total Absorptions: 805
#7 Winnipeg, Manitoba
- Starts: 3,475
- Completions: 3,785
- Total Absorptions: 1,801
Eyes Upon Regina as a Potential Development Hotspot
South of the border, homebuilder sentiment is at an all-time high. This makes sense, considering that the U.S. economy recently experienced record gross domestic product growth, and the Federal Reserve has indicated that it will keep interest rates low, even once the economy is back to pre-pandemic levels.
Canadian homebuilders have not been asked to rate their confidence about the market, but the Canadian Home Builders Association (CHBA) did provide some insight into where the best places to begin construction projects are and why. The organisation ranked Regina first in Canada for homebuilders. The study stated that Regina is a great city if you are a developer, citing low government fees and fast timelines for approving projects.
Regina is below its long-term averages in new housing starts. In September, year-to-date housing starts hit 510, which is up from 395 at the same time a year ago. But Stu Niebergall, president and CEO of the Regina & Region Home Builders’ Association (RRHBA), stated that the low cost of construction would eventually translate to lower housing costs.
What Will the Next Few Months Bring?
Uncertainty is the trending buzzword to describe Canada’s current economic plight over the course of 2020. Because the second wave of the coronavirus has ostensibly stretched across Canada, impacting cities and provinces that were not previously affected – like Manitoba – it is unclear as to how the Great White North will handle the next surge in cases. This will have broader implications for the national economy and the housing sector. Will 2021 be a repeat of 2020, or will we learn from the ebbs and flows of the past year, and sustain the strong market activity? At present, we can take solace in the fact that the national real estate market has shown tremendous resilience throughout the pandemic, and is prepared to forge forward with continued development in the housing sector.