Although the economic rebound from the coronavirus pandemic has been evident across many industries, it appears that Canada’s construction industry has been faring exceptionally well. According to latest data released by the Canada Mortgage and Housing Corp (CMHC), housing starts rose to their highest level since 2007, as big city centres such as Vancouver and Toronto have become hotspots for the development of new housing.
The month of August saw housing starts rise by 6.9% to a total of 262,396 units, after coming in at an already successful number of 245,425 units in the prior month. As much of Canada emerges from the worst recession since the Great Depression, the surge in new construction suggests that the country’s housing market appears resilient to any sort of economic drawbacks.
Well, almost. With the continued success of the construction industry, and thus a continued increase in demand for housing, there are also several accompanying implications. Alongside the strong demand for housing, prices have also been on the rise, especially in Vancouver and Toronto, which have reached record-breaking levels. Moreover, the Bank of Canada’s recent announcement about holding interest rates steady suggests that the demand increase will likely continue.
According to CIBC economist Rocye Mendes, the increase in multiple-unit housing, especially in Vancouver, Toronto and Ottawa, comes with elevated risks. The pandemic has reduced the influx of students and immigrants into Canada, causing rents to fall for multi-unit housing. As a result, investor interest may become subdued over the next several months. Mendes also foresees the pace of construction activity to soon taper down by the end of the year, especially once loan payments resume for Canadians across the country.
Information for this briefing was found via CMHC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.