After posting lacklustre numbers in April and May, Canadian housing starts shot up in last month, bolstered by a record number of condo starts.
Toronto and Montreal saw month-over-month increases of 231 and 68 per cent, respectively, in June, the highest recorded number since 2008.
The rise in starts reflects a shift in buyer preference towards the more affordable condo segment, after new mortgage rules came into effect earlier this year, seriously restricting Canadians’ home buying budgets.
“The market is moving away from single family homes,” National Bank economist Kyle Dahms tells Livabl. “Given the [new mortgage stress test] which came into effect [in January], many people are constrained to condos, rentals, and more affordable housing options.”
Dahms sentiment was echoed by Scotiabank VP and head of Capital Markets Economics Derek Holt, in a recent note.
“The fact that absorption rates for condo projects remain very strong suggests demand—that is also often times years in the making through presales—is matching supply,” he writes.
Dahms forecasts a 3 per cent decline in condo starts on a quarterly basis, when taking into account the relatively soft April and May figures. He also says that the surge in starts won’t continue next month, but instead will move upwards at a slower pace.
“I think market trends indicate that we won’t see another strong [rise in condo starts], but that we will see a steady upwards line,” he says.
Overall, he says that housing starts nationwide are on pace to contract an annualized 9 per cent in the second quarter, following an 8 per cent decline in Q1.