Canada’s new homes market is booming with near record housing starts — with one exception, Ontario. RBC Economics recently published a study on new home starts in Canada, leveraging new data from Canada Mortgage and Housing Corp. from late August.
The report found that while activity across Canada has increased to 200,000 annualized starts (seasonally adjusted) this year, up from a five-year low of about 140,000 starts in May 2023, construction in Ontario has gone in the opposite direction.
Despite being Canada’s largest market, including for new homes construction, Ontario has seen housing starts decline this year to about 63,000 annualized as of July. What’s more, activity has now declined about 40 per cent from record levels at the end of 2022, when the province had an annualized rate of nearly 106,000 starts.
RBC noted the decline is troubling for the nation’s overall housing market, which lacks affordable housing for buyers and renters.
One of the biggest obstacles in Ontario, it noted, are high development fees in many municipalities, including Toronto. The report added that a slump in the resale market is also having a negative impact on new home starts.
Demand among first-time buyers, which make up the largest share of the pool of buyers in Ontario, remains high. But their choice of affordable options is at historical lows. In turn, many prospective first-time buyers are choosing to wait longer to buy. That has led to price declines for condominiums — the most affordable of all types in the province — which further disincentivizes builders, the report added.
That said, cost remains the biggest barrier. RBC pointed to the residential building construction cost index. In Ontario, the metric is about five per cent higher than the combined measure for 15 municipalities across Canada (which includes Ontario cities).