The end of 2021 is a matter of weeks away. According to some economists, this year could mark one of the best times for new construction housing starts since the 1980s.
A new Ontario Economic Analysis report penned by Central 1 regional economist Edgard Navarette stated that new housing starts are expected to total approximately 97,900 units in 2021. This would mark the highest level for starts since 1987.
Looking to the new year, Ontario could anticipate an additional 88,200 units coming in 2022, followed by 92,300 homes in 2023. Future residential building intentions will likely stay strong in 2021, with building permits forecasted to grow 21.4 per cent while new dwellings and renovation spending will increase 35 per cent and 10 per cent, respectively.
With many households forced to work from home as a result of the pandemic, Navarette pointed out that demand for home ownership in both the resale and new home market has “skyrocketed.” Although most of the focus on new construction has been in urban areas, Navarette noted that construction activity has increased in rural and smaller urban markets as people departed from dense cities.
Yesterday, the Building Industry and Land Development Association (BILD) reported that 4,280 new home sales transacted within the Greater Toronto Area during October, seven per cent above the 10-year average.
Renovation spending is said to stay strong during the last two years of the 2021-2023 Central 1 forecast, rising 6.2 per cent and 5.9 per cent. Decreased affordability in the housing market will likely persuade homeowners to stay where they are and instead prompt them to retrofit their homes to age in place or provide rental space as international and interprovincial migration continues to recover post-2021.
“Many households seeing home and work life come under one roof have drawn down savings to renovate their homes or other debt such as lines of credits and credit cards allowing for more space,” said Navarette. “Others eager to cash in on the tight resale homes market have renovated their homes to make them more attractive to potential home buyers.”
Supply chain challenges plagued the global market and construction industry for much of 2021. Ontario exports stayed ahead of 2020’s pace during the first eight months of 2021, up 9.4 per cent, but activity has not fully returned to pre-pandemic levels. Persistent supply chain issues and climate emergencies in resource-rich areas like British Columbia continue to prevent export levels from returning to normal.
“As global trade channels continue to recover, these issues will be transitionary and exports are forecast to increase in 2022 by 7.4 per cent and an additional 3.1 per cent by 2023,” said Navarette.
With the Bank of Canada signalling that interest rates could rise in 2022, Navarette predicted that housing demand and renovation spending could simmer down.
