Canadian housing starts rebounded in December following a surprise decline in the previous month. However, despite the increase, housing starts for the year ended below the 2022 figures. This comes at a time when the deficit of housing units in Canada is at or near record lows.
According to Canada Mortgage and Housing Corp., housing starts reached a seasonally adjusted annual rate of 249,255 units in December, reflecting an 18% increase from the previous month. Economists at Bank of Nova Scotia had anticipated a rebound to 247,500.
In 2023, actual housing starts fell by 7% to 223,513 units compared to the prior year. The federal housing agency attributed this decline to a sharp drop-off in the construction of single-detached homes.
These results highlight the acute housing shortage that Canada is currently facing, partly due to its rapid population growth. In fact, housing affordability in Canada during the third quarter of 2023 reached its worst level since 1982, as per Bank of Canada data.
Statistics Canada estimates for the fourth quarter reveal that Canada’s population grew by 3.2% compared to the previous year, which is five times higher than the average among OECD members.
According to a recent report by National Bank Financial, Canada’s housing supply deficit has hit a new record. Currently, there is only one housing start for every 4.2 people entering the working-age population (age 15-64), while historically, the average has been 1.8.
CMHC economists estimate that by 2030, Canada needs an additional 3.5 million housing units to bring affordability levels down to less than a third of pretax income. BMO Capital Markets suggests that based on current demographic trends, Canada would require an additional 170,000 residences every three months, or 680,000 per year, to accommodate new households.
In December, the trend measure of housing starts, which is a six-month moving average of the monthly seasonally adjusted annual rate, decreased by 2.1% to 249,898 units, according to CMHC’s data.
Overall, the rebound in December’s housing starts brings some optimism, but Canada’s housing market still faces significant challenges in meeting the growing demand and improving affordability.