Real estate and housing development on a National scale are difficult to predict at the best of times, and what we saw last summer and fall once COVID was firmly in place was a very solid example of that. The market didn’t crash like so many people predicted it would, and in fact it’s remained fairly resilient right up and into 2021 as we are here now. We think it’s safe to say that the demand end of the classic equation will always be there, but one that might warranty some concern is related to the supply end of it.
An ample amount of new housing starts are needed to keep this equation where it needs to be for a healthy real estate market, and the needs is magnified in any area of the country seen as desirable by the same prospective homebuyers that real estate agents will be wanting to work with. Those that are newer to the business may find these are trying times, and that’s why our online real estate lead generator here at Real Estate Leads is such an excellent resource for anyone who needs to more out of their client prospecting efforts at a critical time in their young career.
But back to topic, and it does appear that there may be considerably less in the way of new housing starts in Canada throughout the remainder of this year. Let’s have a look at why that might be.
Turbulent Time
While overall it’s true that housing markets in Canada’s major markets look healthy, this year’s turbulence will likely mean fewer housing starts in 2021, according to industry experts. The 3rd quarter of last year (2020) had 237,300 housing starts in all of Canada, according to Canada Mortgage and Housing Corporation statistics.
That worked out to a 22.2% increase from the 2nd quarter that came right before it. Home sales also jumped up 93% during the same period, and prompting a rise in home prices of around 4%. That does indicate a robust economic recovery from the COVID-19 pandemic-induced lockdowns during the spring, but we need to start tempering the enthusiasm starting right there. It seems a deceleration is on the horizon.
The reason this is being forecasted is really quite basic; our sharp economic recovery coincided with the easing of restrictions in the second quarter. Since then, thought, it has stalled and is now expected to be stalling out for the rest of this year. The 2nd wave of COVID-19 that began in the fall along with the unavailability of effective vaccines are principal factors in this hampered growth.
Robust housing demand continued to factor into positives for new home sales and starts through to the end of September. Paired with low inventory and supply bottlenecks meant house prices continued to appreciate. Housing starts will still likely surpass the total for 2019, but new home sales will decrease, and especially in the new condo segment. It’s also likely that despite interest rates being very low and predicted to stay that way, rising home prices will still equal housing affordability troubles and take away from the demand factor to a certain extent.
Region / City Specifics
In Ontario, the 10-year average is about 70,000 housing starts, and last year there were just under that number of starts, primarily on the back of a fairly strong economic performance. This year the expectation is that the pace of projects will be a little bit slower. More specifically for Ontario and the GTA in particular, reduced immigration will likely cut back on housing demand in Toronto’s condo sector throughout this year, but single-family housing demand will remain strong.
In Montreal housing starts have been resilient this year. Residential construction picked up nicely, in comparison to housing starts that only rose by 1% in the first nine months of 2020. However, new condo sales in the city declined last year and this year, which could result in fewer housing starts after existing projects wind down.
New condo sales in Vancouver were a disappointment for 2020, and that’s not surprisingly worked out to fewer housing starts this year – down 33% to this point. But based on low inventory and healthy demand, housing starts likely will not decline too much through 2021.
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