Canada's housing starts led by new apartments in Vancouver and Toronto

Construction progress of Oakridge Park, as of March 9, 2023. (Kenneth Chan/Daily Hive)

Compared to the first half of 2022, the number of housing starts in Canada’s six largest metropolitan areas increased by just 1% over the first half of 2023, based on Canada Mortgage and Housing Corporation’s (CMHC) newly released data.

Generally, housing starts are defined as the beginning of construction work on the building.

This slow activity is due to high borrowing costs for construction financing as a result of heightened interest rates and higher construction and labour costs from inflation.

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CMHC’s update is based on the combined performance of the major metropolitan regional markets of Vancouver, Calgary, Edmonton, Toronto, Ottawa, and Montreal.

Vancouver and Toronto combined dominated housing starts over the period, accounting for 66% of the new units breaking ground — driven by apartment activity. In fact, the strong apartment housing starts in Vancouver and Toronto offset the lower overall volumes in the other markets and the weakness in single-detached houses, semi-detached houses, and row houses for all markets.

Vancouver had the second-highest number of starts, rising by 17,458 units or 49%, with 68% of these units being apartments.

The highest number of starts was in Toronto, where 25,768 units were recorded, representing a 32% year-over-year increase. Out of this total, 58% were apartments.

The combined number of apartment housing starts in Vancouver and Toronto represented 54% of the 65,905 overall housing starts across all six regions.

It was noted by CMHC that secured purpose-built rental apartment starts reached a multi-decade high in Toronto. Condominium apartments also contributed to the higher apartment figures, but less so than rentals. Many projects over the first half of 2023 were financed during the more favourable economic and financial conditions of 2022.

But in Vancouver, the larger contribution for apartment starts came from the 91% increase in condominium starts compared to the first half of 2022.

With that said, CMHC now anticipates the pace of apartment starts to slow in both Vancouver and Toronto due to the deteriorating economic and financial conditions that have taken hold in 2023. CMHC also believes some projects have been delayed this year due to the challenges facing new construction.

“Elevated rates of apartment construction are not likely to be sustainable due to various challenges facing developers. These challenges include higher construction costs and higher interest rates,” reads the report.

“This cost growth is a major challenge to the sustainability of the strong apartment construction trends in Toronto and Vancouver.”

Calgary’s housing starts held steady at 8,106 over the first half of 2023, unchanged from the record high of the first half of 2022. Apartment starts accounted for over 50% of all starts in Calgary.

However, Montreal had the largest decline in housing starts amongst the six regions, with 5,927 units recorded in the first half of 2023 — down by 58% compared to the first half of 2022. This was the lowest level of housing starts in Montreal for the first half of a year in 26 years. All types of housing saw significantly lower starts.

“Unlike Toronto and Vancouver, Montréal tends to prioritize small and low-rise apartment structures. These smaller projects require less time for planning and construction. The drop in housing starts in Montréal was, therefore, more reflective of the recent deterioration in financial conditions,” explains CMHC.

Edmonton had the second largest decline, falling by 29% based on 5,072 units recorded. This was led by the decline in apartments.

cmhc housing starts six regions first half 2023

Housing starts in Canada’s six largest metropolitan areas over the first half of 2023. (CMHC)

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