New home construction reached its highest level in more than a decade as the Canadian real estate market continues to brave expectations of a slowdown.
The number of housing starts rose to 262,396 units on an annual basis in August, up 6.9% from 245,425 units in the previous month, said Canada Mortgage and Housing Corp. in Ottawa on Wednesday. The highest monthly total since September 2007 was driven by new construction in Toronto and Vancouver, particularly multiple units such as condominiums.
This is the latest sign of a booming real estate market, even as the economy emerges from its steepest downturn since the Great Depression. Existing home prices in major cities like Toronto have soared to record highs due to strong demand, low inventory levels and historically low borrowing costs.
According to CMHC, several Toronto, Vancouver, and Ottawa unit launches soared. However, there can be drawbacks.
"The fact that much of its recent strength has been concentrated in the multi-unit sector poses a risk," Rocye Mendes, an economist with the Canadian Imperial Bank of Commerce, said in a report. "With demand from both immigrants and students declining recently, rents have come down, potentially reducing investor interest in the coming months."
Mendes predicts that the pace of construction "will cool as the year progresses, especially as mortgage and other loan payments resume after a period when many households have taken advantage of the deferrals."