Canada’s Housing Market Stable, Ontario’s Slumps: New RBC Report

A construction worker passes a condominium site with a roll of cable in Toronto, on Oct. 8, 2021. Reuters/Chris Helgren

Canada’s housing boom is being dragged down by Ontario, where steep declines in new builds are threatening to worsen the affordability crisis, according to a new analysis from the Royal Bank of Canada (RBC).

While construction has surged in much of Canada, RBC’s report draws on information from the Canada Mortgage and Housing Corporation (CMHC) to conclude that Ontario is dragging down the nation’s numbers due to a sharp drop in new builds in the Greater Toronto Area (GTA).

“While homebuilders and municipalities are keen to respond, factors like the high development and building costs in Ontario, and substantial inventory are weighing on the initiation of new projects,” reads the Aug. 20 report by RBC economist Robert Hogue. “This raises concern about whether future housing stock can meet demand.”

Housing starts in the past four years have been at record level and remain high, but the report says the “concerning” slump in Ontario risks making it harder for some people to afford a place to live, according to Hogue.

In terms of the numbers, national housing starts rose to 263,000 units last month, a 3.7 percent jump from June, with significant rises in Alberta, Saskatchewan, Quebec, Manitoba, and Canada’s Atlantic provinces. B.C., meanwhile, recorded a modest decline, according to CMHC data. However, in Toronto, new housing starts have gone down 69 percent since last year, particularly due to rising development costs caused by expensive labour, extensive municipal fees, and high material costs.

Hogue says that Ontario’s current gloomy housing start numbers will have a long-term effect in depressing the province’s real estate market, noting that large projects take years to be completed once started, and housing is running out fast in the GTA.

“The GTA market is still absorbing the wave of condo units completed in 2024 started during the pandemic or even earlier,” Hogue said. “The downturn in Ontario’s housing construction pipeline could have dire consequences for 2026 and beyond.”

In March of this year, the Carney government announced its Build Canada Homes plan, pledging to double Canada’s annual housing construction to around 500,000 units per year.

“By getting government back into the business of building affordable homes and by making the market work better, we will drive a huge increase in housing supply so we can bring cost down for Canadians,” Carney said March 31.

With $35 billion in funding, the plan aims to provide more support for prefabricated homebuilding, invest more in housing for seniors and students, and get affordable homes built more quickly. Carney also said he would slash municipal fees and bring back a tax incentive from the 1970s to boost rental construction.