Ravenous demand for housing nullifies supply boost

by Neil Sharma on 03 May 2021

Canadian housing starts hit 273,664 in March, up from 252,636 a month earlier, but the enhanced activity still hasn’t been able to keep pace with voracious demand.

“The national trend in housing starts increased in March, reflecting very elevated levels of activity in January and March 2021,” said Bob Dugan, CMHC's chief economist. “Multi-family SAAR [Seasonally adjusted annual rates] starts rebounded strongly following decline in February, with Toronto and Vancouver registering particularly large gains in this segment.”

The CMHC data noted that’s a 21.6% increase from 275,567 in February, however, even the infusion of supply couldn’t prevent home prices from rising as quickly as they have.

According to a report from TD economist Omar Abdelrahman, the multi-family category provided the majority of the new supply—urban starts increased by 33.8% to 222,400 units—while urban single-detached starts rose by 3.6%t o 78,600.

Abdelrahman also noted that Ontario and British Columbia comprised the lion’s share of starts, with increases of 130,700 and 71,200 units, up from 90,100 and 45,200, respectively, in February.

Quebec, Canada’s second-most populous province, saw a decline in housing starts, dropping to 83,600 units in March from 91,500 a month earlier, although that could be explained by the province’s strict COVID-19 protocols that include months-long curfews.

In the first quarter of the year, there were 307,700 housing starts in Canada, jumping from 239,700 in Q4-2020. TD believes the increased investment in the country’s housing market will grow Canada’s GDP, although it did not provide figures.

The boost in housing supply hasn’t tempered the country’s runaway housing prices. A research paper from RBC Economics demonstrated that housing price growth has been most acute in the country’s smaller housing markets, notably in Ontario and British Columbia. In Ontario, year-over-year price gains topping 30% were present in 75% of the province’s markets, while 20% saw prices increase north of 40%.

“Soaring prices are poised to attract more sellers in the coming month... New listings rose back-to-back to a new record high of 1 million units (seasonally adjusted and annualized) in March. It’s just that they haven’t increased enough to meet demand and ease demand-supply conditions in a material way. These conditions still put pricing power squarely in the hands of sellers practically everywhere in Canada.”

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