When it came to home sales, the Toronto housing market revved back to life last year after a weak 2018 and plodding start to 2019. As many homebuyers stepped off the sidelines throughout the year and provided the market with a shot of adrenaline, there was one important marker of housing health that still lagged — home building.
New home construction declined in 2019 across Ontario, with the province’s major markets — Toronto and Ottawa-Gatineau — seeing sharp drops in housing starts as builders took a breather following a frenzy of activity in 2017 and 2018.
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But just as 2020 is expected to be another busy year for sales in the reinvigorated Toronto housing market, economists are also anticipating a rebound in home building. In fact, according to Central 1 Credit Union economist Edgard Navarrete, the steep decline in home building in Toronto and across other Ontario markets in 2019 will be looked back on as simply “a blip on the radar” with strong activity resuming for 2020 and beyond.
In a Central 1 Housing Forecast for Ontario published at the end of the year, Navarrete wrote that 2019’s weak numbers can be chalked up to the strength of the preceding years and a delayed reaction to federal government policy that cooled demand in the housing market.
“The new homes market’s delayed response is not surprising given the nature of new home construction,” wrote Navarrete.
“Builders usually sell new units several years before a project breaks ground. Therefore, the activity seen in 2017 and 2018 was not indicative of new housing demand in those periods but several periods back when the market was unaffected by trade tensions and policy shocks. Only recently, has sluggish new housing demand caught up with the market as home builders bring fewer projects to market.”
The economic forces that gave home sales the spark they needed in 2019 will allow builders to boost home construction this year. The Toronto region’s population will continue to put up strong growth numbers for the foreseeable future while government policy is expected to bolster home building through increased investment aimed at expanding housing supply and tackling affordability issues.
Looking at Ontario as a whole, Navarrete expects that there will be 74,100 housing starts in 2020, a 6.8 percent increase from 2019’s total of 69,400. This will be followed by a further 6.2 percent increase to 78,700 starts in 2021 before a projected downtick of 0.9 percent to 78,000 starts in 2022.
If these predictions from Central 1 come to fruition, it will mean homebuilding activity from 2020 to 2022 will essentially mirror activity from 2016 to 2018, giving credence to Navarrete’s characterization of 2019’s slow pace as “a blip on the radar.”