Housing starts stall in October as multi-unit builds drop dramatically

Housing starts

After a flurry of homebuilding activity through most of the first nine months of 2020, developers in Ottawa-Gatineau slowed things down in October.

Builders started work on 930 new dwellings last month, a drop of more than 20 per cent from the 1,196 starts recorded in October 2019, according to the Canada Mortgage and Housing Corp. While starts in Ottawa jumped 12 per cent to 748, new builds in Gatineau plummeted 66 per cent year-over-year to just 182.

As usual, most of the new construction was in multi-unit housing, with buildings such as condos and apartments accounting for 567 starts. But that was down 35 per cent from a year ago, while the number of single-detached starts in the region rose 11 per cent to 363. 

That trend was mirrored at the national level, with some analysts suggesting buyers are seeking dwellings with more space as the pandemic keeps people closer to home.

Earlier this month, the Ottawa Real Estate Board also said it was detecting a “shift” away from condos as buyers sought properties with more room for amenities such as gyms and home offices.

Meanwhile, the region’s annual pace of housing starts – which can fluctuate dramatically from month to month due to the volatile nature of multi-unit starts – also declined steeply last month.

CMHC said the seasonally adjusted annual rate of new builds in Ottawa-Gatineau fell from 17,304 in September to 10,335, a 40 per cent drop.

National starts up 3%

Nationally, the annual pace of housing starts increased three per cent in October compared with September, CMHC said, although the increase was less than some economists predicted.

The seasonally adjusted annual rate of housing starts rose to 214,875 units last month compared with 208,715 in September, the national housing agency said. Economists surveyed by financial data firm Refinitiv had on average expected an annual rate of 222,000.

CMHC said that single-detached houses in cities such as Toronto and Montreal contributed to the upswing in overall housing starts.

“Homebuilding seems to be normalizing across most of the country, after a sizzling summer,” BMO economist Priscilla Thiagamoorthy in a note to clients, reacting to Tuesday's data.

“While we could see a softer condo market, rising demand for single-detached homes, supported by low interest rates and teleworkers, will still keep the housing market resilient overall.”

The annual rate of urban starts rose 3.5 per cent in October to 202,584 units. The pace of urban starts of apartments, condos and other types of multiple-unit housing projects edged down 0.2 per cent to 144,796, while urban starts of single-detached homes rose by 14.3 per cent to 57,788. Rural starts were estimated at a seasonally adjusted annual rate of 12,291 units.

“For the last decade, highrise construction fuelled housing starts thanks to millennials and international migrants vying for a little slice of the sky,” wrote Thiagamoorthy.

“But now, with immigration flows slowing, and a shift in preference for larger suburban homes, we could see a bit of a slowdown in condo construction.”

Overall, the six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 222,734 in October, up from 214,372 in September.

TD economist Rishi Sondhi noted that the Prairies drove October's increase, with strong gains in Manitoba and Alberta, on top of an increase in Ontario.

CHMC's data on new home building comes on the heels of Monday's release of existing home resales from the Canadian Real Estate Association. CREA's data showed October home resales were down from a record high in September, but still more than 30 per cent above last year's levels. One reason was that people were seeking out suburban houses with more space as the pandemic required people to stay home.

“Relative to other industries, homebuilding has so far breezed through the pandemic,” wrote Sondhi in a note to clients on Tuesday.

“Notably, single-detached starts are beginning to pick up, which suggests that builders may be reacting to the outperformance in detached home sales observed during the pandemic.”

– With files from the Canadian Press