Photo: James Bombales

Single-detached housing starts are only going to decline in coming years, according to the Canada Mortgage and Housing Corporation’s (CMHC) Fall 2017 Housing Market Outlook report.

The report, released today, predicts that low-rise starts, which had risen this year in line with a surge in demand, will decline from 75,900 in 2017 to between 66,200 to 68,400 starts in 2018 and 66,100 to 68,900 in 2019.

Meanwhile, condo starts are expected to increase to between 128,800 and 139,400 units in 2017, before levelling off to between 124,400 and 136,200 units in 2018 and between 123,200 to 137,800 in 2019, numbers that remain well above the historical average.

“We forecast that high price points and mortgage rates will shift demand away from the single detached home towards multi-family units,” CMHC Chief Economist Bob Dugan tells BuzzBuzzNews.

CMHC market analysis principal Dana Senagama tells BuzzBuzzNews that when it comes to new construction single-detached homes in the GTA, land constraints will also contribute to the slowing number of starts.

“We’re not going to see as many units come on board, when you look at land constraints, and labour constraints in the area,” Senagama says. “Of course, there’s also a real push towards high rise in the area, a trend that began in 2006 and has only been continuing since then.”

According to Urbanation senior vice president Shaun Hildebrand, a reduction in demand for low-rise housing in the GTA in the spring contributed to the smaller amount of starts in the fall. But he says that a shift away from single-detached housing has been in the works for years.

“The reality is that low density sites are getting more and more expensive and farther and farther away from Toronto,” Hildebrand told BuzzBuzzNews. “Low-rise housing starts were well above 30,000 fifteen years ago, and they haven’t surpassed 20,000 since 2008, because developers are focused on building high density housing.”

Along with the slowing of housing construction, CMHC predicts that national housing prices will increase more slowly in 2018 and 2019 than they did in the spring of 2017.

“We’re expecting price growth much more in line with inflation,” says Dugan.

But he’s also quick to mention that the slow price growth may not apply to particularly desirable markets, like Toronto.

“Of course, supply shortages do have an effect on housing prices, and you may see that in Toronto and the GTA moving in 2018 and 2019,” says Dugan. “Often when demand increases, developers will respond to that demand with supply, but the response rate has traditionally been very low in Toronto.”

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In Q2 of 2017, the number of completed and unsold dwellings nationally per 10,000 people was 4.2 units, the lowest level in six years.

Dugan says that, while prices have fallen since the Ontario government implemented its Fair Housing Plan in April, this lack of supply coupled with strong demand means prices will begin to rise in 2018.

“You did see prices drop when the plan was put in place in April, but lack of supply will mean prices continue to climb in the new year,” he says. “In Toronto, you have a historically low vacancy rate, and a year-over-year price growth in the condo market of over 20 per cent. That’s going to continue into 2018 and 2019, and it’s going to present some serious affordability challenges.”

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