"The realtor came in and basically showed them that the market is done"
New home construction in Toronto continued at a record pace in June, the Canada Mortgage and Housing Corporation (CMHC) has revealed, but economists believe the streak will soon come to an end as hinted by the growing number of cancelled home renovation projects.
Housing starts went up 27% to 49,860 in Toronto last month. By contrast, there was a noticeable 3% drop from 282,188 in May to 273,841 in June for new home construction at a national level.
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“Long-term, I think the home construction market is going to remain strong, but the next six to 18 months, there will be some weakness,” said Moffatt, professor at Ivey School of Business. “We’re not going to see numbers like this continue.”
Moffatt added that financing costs for projects are going up amid a period of lower consumer demand – and the home renovation industry is already starting to feel the pinch of the cooling market.
More existing projects for home renovations in Toronto are being cut or cancelled. Inflation is at its highest level since the early 1980s, and with only interest rates to combat it, the future of the housing market is not spared in the central bank’s attempts to suppress inflation.
For instance, home contractor Anthony Sayers had a renovation project in Toronto with a budget cut almost in half upon the realtor’s advice to his clients. He said the homeowners were hoping to fund the renovation with the sale of another property they own, but that might no longer be possible given the current market conditions.
“The realtor came in and basically showed them that the market is done,” Sayers told Bloomberg. “It has turned down, and the money that they put in, they might not get back.”
Read more: Toronto residents – to buy a new home or renovate?
Home contractor Roman Orlov also shared with Bloomberg that business inquiries have dropped about 40% in the past few months. It isn’t just home contractors who are affected, too: Orlov said the same can be observed of his colleagues who do landscaping, painting and pool work.
“People are afraid,” Orlov said.
