“While recent home prices trends are starting to raise some eyebrows, there’s little concern about overbuilding in Canada with housing starts trending near fundamental requirements,” BMO senior economist, Robert Kavcic wrote in his latest market analysis. “This is true in the ‘hot 3’ cities (Vancouver, Calgary and Toronto) as well, where resale price growth is heated, but new construction is largely following population trends.”
The trend measure for housing starts dropped month-over-month from September to October of this year, due in part to a decrease in condo starts.
“The decrease in the trend reflects a decline, in October, of starts of multi-unit dwellings, including condominiums,” said Bob Dugan, CMHC’s Chief Economist. “Given the elevated level of condominium units under construction, our expectation is that condominium starts will continue to trend lower over the coming months.”
CMHC estimates the seasonally adjusted annual rate for homes dropped to 183,604 units in October, down from 197,355 a month prior.
“Toronto, surprisingly to many, has seen starts slow considerably in the past year, with the 6-month average now sitting at 27.9k, or the lowest level in 4½ years and precisely half the level seen at the highs in mid-2012,” Kavcic wrote. “Fittingly, building trends in these three cities largely mirror different population growth trends since 2012—relatively stable in Vancouver, accelerating in Calgary and cooling in Toronto.”
Related: The good times roll on for Toronto’s condo market… but for how long?
Industry players and speculators shouldn’t worry about overbuilding in Canada according to one economist, who believes even the hottest markets are healthy.