The number of condominiums under construction in Ottawa has dramatically slowed this year as developers work to sell off the hundreds of completed new units already on the market, the Canada Mortgage and Housing Corp. said Tuesday.
The slowdown in condo construction comes as the overall pace of home building in Ottawa is accelerating, according to CMHC.
However, the number of year-to-date condo starts has fallen 27 per cent to 564 units in 2016. Experts say there are few signs of a rebound on the horizon.
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“Condominium starts this year are expected to remain muted as the inventory overhang clears,” said Anne-Marie Shaker, CMHC’s senior market analyst for Ottawa, in a statement.
Late last month, CMHC reported that there were 535 condominiums in Ottawa that have been completed, but not yet sold. That was down from 699 units in February.
At the same time, local developers that were focused on condo towers only a few years ago are now shifting their attention to building new purpose-built rental units.
Year-to-date rental apartment starts are up 21 per cent to 516 units so far in 2016.
Some developers say they’re simply responding to shifting demographics, as younger residents are less keen to own property than a generation ago and may find themselves priced out of the real estate market after years of appreciating property values.
Another reason is that lenders are becoming less keen to finance condominium projects, said DCR Phoenix planning manager Michael Boucher. The firm is the project manager for a proposed redevelopment project in Vanier that includes hundreds of new rental units in buildings of up to 18 storeys.
While the condo market may be slowing down, other segments of the housing market are more than picking up the slack.
Overall, year-to-date housing starts are up 16 per cent to 4,405 homes, led by a sharp increase in row houses and semi-detached dwellings, according to CMHC figures.
In addition to reporting actual housing starts, CMHC also calculates a seasonally adjusted six-month rolling annualized average to show trends in new home construction and smooth out the spikes caused by large multi-residential projects.
By this measurement, housing starts in Ottawa were trending at 6,179 units in October, compared to 5,666 units in September.
Nationally, CMHC says the pace of housing starts slowed in most regions of the country in October, with an especially big drop in British Columbia.
The agency says the seasonally adjusted annual rate fell to 192,928 units in October, down from 219,363 units in September.
The drop came as the seasonally adjusted annual rate of urban starts fell 12.1 per cent in October to 176,131 units. Rural starts were estimated at a seasonally adjusted annual rate of 16,797 units.
Multiple-unit urban starts dropped 15.3 per cent to 115,402 units for the month, while single-detached urban starts slipped 5.4 per cent to 60,729 units.
CMHC says the pace of urban housing starts picked up in Ontario last month but there were declines in Quebec, the Prairies, Atlantic Canada as well as British Columbia
The annual pace of urban starts in B.C. fell to 25,517 in October compared with 46,294 in September.
Bank of Montreal senior economist Robert Kavcic said British Columbia was the big story.
“We’ll see if this level of activity, particularly in Vancouver where starts fell to the lowest since 2011, holds in the months ahead in response to softening demand conditions,” Kavcic wrote in a note to clients.
The drop in home starts in Vancouver comes as real estate sales in the region have also fallen sharply in recent months.
In August, the B.C. government implemented a 15 per cent tax on foreigners buying homes in Metro Vancouver, while the federal government moved last month to tighten rules for mortgage lenders and foreign buyers in an effort to stabilize hot housing markets such as Toronto and Vancouver.
The national six-month moving average of the monthly seasonally adjusted annual rate stood at 199,920 units in October compared with 199,262 in September.
The housing starts data came as Statistics Canada reported municipalities issued $6.9 billion worth of building permits in September, down 7.0 per cent from August.
The decrease was due in large part to a drop in plans for construction for non-residential buildings.
The value of non-residential building permits fell 22.3 per cent to $2.2 billion in September as all three non-residential components – commercial, institutional and industrial – moved lower.
The value of permits in the residential sector gained 2.6 per cent to total $4.6 billion in September, boosted by multi-family dwellings.
-With a report by the Canadian Press
