Recent trends show 'underlying structural strengths,' says BMO's Kavcic
Housing starts in Canada hit their highest rate for over a year last month, a trend that indicates room for optimism on the home construction front, according to a top economist.
BMO’s Robert Kavcic said housing starts hitting the 279,500 mark on an annualized basis showed a sustained level of building ability, signalling a trend that “despite high borrowing costs and a slow resale market, highlights underlying structural strengths that mitigate weaker market segments.”
In the breakdown of housing types, urban single-family starts saw little change at a 43,800 annualized clip. However, multifamily starts surged to 217,000, nearing record highs not seen since the early 1990s. Alberta, in particular, experienced substantial growth, with starts exceeding 50,000 for the first time since the oil boom of 2015, supported by a 4% year-on-year increase in population due to both international and interprovincial migration.
Ontario also showed strong construction activity, even as the resale market there remains burdened with excess inventory and tepid investor interest. This situation is partly alleviated by a 13% reduction in the 12-month average of multi-unit starts from its 2023 peak.
A significant shift is seen in the purpose of new constructions, with a pivot towards building rental and affordable housing, driven by various policy initiatives. In Toronto, the construction of units for homeownership has declined nearly 20% since early 2023, while rental construction has reached record levels, providing some stability to this typically cyclical sector.
Further illustrating the disconnect between the slowing resale market and robust construction levels, Kavcic said, “We have consistently seen excess demand for housing, which is distinct from supply issues. This is a narrative we’ve explored extensively.”
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