Skilled labour, credit shortages are slowing down builders despite rising building permits
Canada’s housing starts in August failed to maintain the momentum seen in July, and experts say builders need more than good intentions and desperation to establish a reliable upward trend.
The six-month moving average for housing starts dropped 2.9% from July’s levels, down to 248,480 units in August, according to the latest data from the Canada Mortgage and Housing Corporation (CMHC). The decline reflected ongoing hurdles in the construction sector despite some progress earlier in the summer.
In raw numbers, housing starts across Canada in August were down 22%, with the seasonally adjusted annual rate (SAAR) dropping to 217,405 units from July’s 279,804. Despite the year-to-date actual housing starts being 5% higher than 2023, these numbers were not enough to sustain long-term growth.
“July’s bump in housing starts is looking like a blip,” said Clay Jarvis, a real estate financial expert and NerdWallet Canada spokesperson. “August’s data is a reminder that generating momentum in housing construction requires more than good intentions and desperation."
Three key ingredients
Jarvis pointed to three key factors that are holding back construction.
"Builders are still short on three key ingredients that get shovels in the ground: skilled labour, available credit and demand for new construction,” he said. “For starts to establish a reliable upward trend, all three of these shortfalls need to reverse course.”
While a recent increase in residential building permits and the possibility of lower interest rates could lead to improvements down the road, Jarvis warned that every setback in starts further complicates Canada’s efforts to meet its housing targets.
Uneven growth
The decline in housing starts isn’t uniform across the country.
Urban centres, with populations over 10,000, experienced a 24% decrease in housing starts, with a significant 29% drop in multi-unit construction. Single-detached urban housing starts, however, rose by 3%. Rural starts remained relatively stable, estimated at 17,927 units.
Meanwhile, rural starts monthly SAAR was estimated at 17,927 units.
CMHC chief economist Bob Dugan pointed out that the year-to-date rise in housing starts has been primarily led by specific areas.
"Growth in actual year-to-date housing starts has been driven by both higher multi-unit and single-detached units in Alberta, Quebec and the Atlantic provinces,” Dugan said in the report. “By contrast, year-to-date starts in Ontario and British Columbia have decreased across all housing types.”
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In Vancouver, housing starts have dropped by 20% compared to 2023, but it’s important to note that last year marked a record high for construction. Similarly, Toronto saw a 14% decline in housing starts year-to-date, following a high level of activity last year.
“As the housing shortage continues, higher levels of construction are needed to restore affordability in Canada's urban centres," said Dugan.
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