Condo construction starts hit new record in Toronto

Most of the new condo sales that occurred over the last year and a half are in projects that haven’t even broken ground yet.

The red-hot condominium market drove an increase in new home construction in Canada last month as starts of single detached houses continued to fall, new data shows.

Housing starts rose to 229,737 in February, a 7 per cent increase compared to the previous month, according to seasonally adjusted annual rates from the Canada Mortgage and Housing Corporation. Construction of condominiums and other dwellings containing multiple units jumped by 14 per cent nationwide, compared to a 7 per cent decline in single-detached houses.

Activity was particularly strong in Ontario, where new home starts jumped to 102,838 units, a 26 per cent increase. This was led by activity in the Toronto area, which rose 78 per cent on the back of a record number of condominiums starts, the CMHC said in a release.

New construction of the highly sought-after housing type soared by 103 per cent to 63,396 units in Toronto while starts of single-detached homes fell by 13 per cent to 7,635.

“The story here is clearly not about lack of supply…but rather composition of supply,” Bank of Montreal chief economist Doug Porter wrote in a note to investors.

“Indeed, note that Toronto starts jumped to the highest since at least 1990, but all of the gain was in condos.”

Soaring house prices have pushed buyers toward more the affordable condominium market, prompting a large shift in development activity toward the sector.

In a separate release Thursday, Statistics Canada reported that the value of building permits issued by municipalities rose 5.6 per cent nationwide in January compared to December — driven by a significant increase of 71 per cent in permits for multi-family homes in Ontario including condos and apartments. Nationally, apartments and condominiums accounted for about three-quarters of the value of permits for multi-family dwellings, while row houses made up just under 18 per cent.

While most new condominium construction was focused on urban areas in February, recent sales data suggests development is quickly moving into suburban areas. The number of new condominiums “pre-sold” in the suburban 905 region of Toronto hit 13,282 in 2017, a 54 per cent increase over 2016, “which was itself a record year,” said Shaun Hildebrand, senior vice president of Urbanation, a firms that compiles and analyzes data on the sector. Pre-sold condominiums are purchased before construction begins.

“Most of the new condo sales that occurred over the last year and a half are in projects that haven’t even broken ground yet,” Hildebrand said. “So this is just the beginning of what’s going to be a very strong run up in construction starts over the next couple of years.”

Last year was the first time in which the number of units sold in the 905 region almost equalled the number sold in the city of Toronto, he added.

Housing starts in British Columbia fell 26 per cent in February, with construction of both single-detached and multi-family units declining by 27 per cent and 26 per cent respectively. But this came on the heels of particularly strong starts in Vancouver in January, suggesting the province was continuing to build on that increase in activity, the CMHC said.

Construction of rental apartment units in Montreal continued to surge, with 1,400 new units started since the beginning of the year – three times the amount during the same period in 2017. Housing starts moderated in Alberta as elevated apartment inventories continued to slow the pace of construction.

Naomi Powell
March 8, 2018 – Financial Post