Canada’s New Homes Boom Surges, But Ontario Faces Sharp Decline

UPDATE: Canada’s new homes market is witnessing a significant surge, with 200,000 annualized housing starts reported in 2023. However, a striking exception exists in Ontario, where new data reveals a sharp decline in housing construction.

According to a recent study by RBC Economics, leveraging data from the Canada Mortgage and Housing Corp., Ontario’s annualized housing starts have plummeted to a mere 63,000 as of July, marking a staggering 40 percent decline from record levels seen at the end of 2022. This alarming trend poses a significant threat to the overall housing market in Canada, which is already grappling with a serious shortage of affordable housing for both buyers and renters.

The report details that while Canada as a whole has rebounded from a five-year low of 140,000 starts in May 2023, Ontario’s construction sector is moving in the opposite direction. The province, despite being the largest housing market in Canada, faces multiple challenges including exorbitant development fees, particularly in major municipalities like Toronto.

With demand among first-time buyers remaining robust, the availability of affordable options has reached historic lows. Many potential buyers are now delaying their purchases, leading to a notable drop in condominium prices—the most affordable housing type—further discouraging builders from commencing new projects.

RBC emphasizes that high construction costs are a critical barrier to new housing developments. The residential building construction cost index in Ontario is approximately five percent higher than the combined measure for 15 municipalities across Canada.

As the situation unfolds, the implications for Ontario’s housing market are profound. With first-time buyers making up the majority of the market, the lack of affordable homes could lead to prolonged delays in homeownership for many. This dynamic not only affects individual families but also poses broader challenges for the Canadian economy, which relies on robust housing activity for growth.

NEXT STEPS: Stakeholders will be closely monitoring these developments as they could prompt policy responses aimed at alleviating the pressures on Ontario’s housing market. With a growing urgency to address these issues, the coming months will be critical for both current and prospective homeowners in Ontario.

Stay tuned for more updates as this story develops.