The housing challenges in Canada are far-reaching and complex. Housing supply is at the heart of these challenges. We need more supply and we need the right type of supply to help ensure that everyone in Canada has a home that they can afford and meets their needs.
We’re publishing a series of reports from 2022 to 2023 — including our Housing Supply Report to get a better understanding of the housing supply challenges facing Canada and to stay on top of trends.
The Housing Supply Report provides insights into the new housing supply in Canada’s 6 largest census metropolitan areas (CMAs). Our team of economists provide an updated analysis on a range of current housing supply trends.
This edition of the report builds on the analysis in the May 2022 and October 2022 reports.
Here’s what we discovered:
Supply isn’t keeping up with demand and new housing construction is mixed across centres
Our analysis found that current new home inventories are at historic lows. While housing starts remained strong in 2022, new supply was not enough to keep up with demand.
Calgary and Edmonton had record-high starts (up 15% and 16% respectively from 2021). These markets have home prices that are affordable to many homebuyers, even with the increased mortgage interest rates.
In Toronto, new construction reached levels not seen since 2012 and had the fourth-highest annual total on record.
Montréal was the outlier with a 25.3% drop in housing starts in 2022. This follows record-high starts in 2021 and indicates a shift back to recent average rates.
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Most construction was in low-amenity neighbourhoods — except for apartments
New research completed by the University of British Columbia using CMHC data shows that almost 80% of housing starts between 2016 and 2021 in the CMAs featured in the report were in low-amenity neighbourhoods. Fewer than 10% were in high-amenity neighbourhoods.
Toronto had the highest level of starts in high-amenity census tracts at 21%, while Calgary and Edmonton didn’t have any starts in high-amenity areas.
Apartment units tend to be more optimally located, with 36% built in medium- and high-amenity areas. New single-detached, semi-detached and row units were located almost exclusively in low-amenity areas (95% to 98%).
Both consumers and developers are feeling the impacts of increased interest rates
Low interest rates in the first quarter of 2022 contributed to home prices reaching record highs in many Canadian cities. As interest rates increased in 2022, homebuyer purchasing power dropped in the second half of the year.
This was followed by a slight decrease in home prices in most markets.
While this shift led some developers to take a more cautious approach to start new condominium projects , low vacancy rates and rising rents sparked interest in purpose-built rentals in all CMAs except Toronto.
More apartments in Canada’s urban housing stock
Canada’s 6 largest centres experienced a major surge in apartment construction.
In Toronto, Vancouver and Montréal, apartment construction made up over 70% of total starts. Apartments made up most of the new construction in Montréal at nearly 87% — even though the total number of starts, apartments included, dropped in the CMA.
Highlights for Canada’s largest centres:
- Despite industry challenges, residential construction remained high and stayed stable in 2022.
- While apartment starts remained almost unchanged, there was a significant drop in condominium apartment construction. This was offset by a surge in rental apartment starts.
- Starts in Coquitlam increased, keeping pace with transit-oriented development and growth in the municipality.
- New purpose-built rental apartment construction increased in 2022. Growth was driven by projects near the downtown core and in developing neighbourhoods outside the centre.
- Semi-detached starts were an exception to the growth and saw a 24% drop compared to 2021.
- Single-detached and townhome starts saw gains of 8.3% and 4.5% respectively.
Calgary housing starts
- Residential construction in Calgary hit a record high in 2022, surpassing the previous record in 2014.
- Townhome and apartment starts had the strongest gains as both segments saw a year-over-year increase of 23%.
- Growth in the share of apartment starts accounted for 45% of total housing starts.
- Based on data going back to 1990, rental starts were at the highest level on record.
Toronto housing starts
- While housing construction activity in Toronto increased in 2022, the supply of newly completed homes available for purchase was at the second-lowest level on record.
- The Ontario construction labour strike in mid-2022, supply-chain delays and skilled-trade labour shortages disrupted building activity during the year.
- Purpose-built rental apartments were the only housing type that decreased in 2022 (down 7% from 2021). This was the second year in a row that rental apartment starts decreased.
Ottawa housing starts
- The increase in housing starts was due to increases in the rental apartment and condominium segments. Both types of apartments accounted for more than 50% of housing starts in 2022.
- Single-detached housing starts decreased by 22%, falling slightly below the previous 5-year average. Row house starts decreased by 9% but remained above average.
Montréal housing starts
- The decrease in housing starts in Montréal, varied by dwelling type. Freehold housing construction decreased by 38%, the greatest decrease among all dwelling types and the lowest level ever recorded.
- Although rental apartment starts declined by 28% in 2022, they remained the most built type of housing structure last year.