1. Overview of the Situation
Two years into the Ford government’s ambitious pledge to build 1.5 million new homes by 2031, Ontario’s housing sector shows troubling signs of stagnation. Despite recent housing laws aimed at addressing the crisis, the pace of home construction appears to be slowing significantly.
2. Decline in Housing Starts
The first half of 2024 has seen a marked decline in housing starts compared to the previous year. According to recent data from the Canadian Mortgage and Housing Corporation (CMHC), the number of new homes initiated between January and June dropped to 36,371 in Ontario areas with populations exceeding 10,000. This represents a 14% decrease from the same period last year.
In June alone, new housing starts plummeted by 44% year-on-year, with 5,681 new homes started this year compared to 10,114 in June 2023.
3. Impact on Future Construction
The drop in new home sales, a key indicator of future construction activity, is raising concerns. Developers rely on current sales to fund future projects, and the decline in sales is likely to result in a significant decrease in new housing starts in the coming years. David Wilkes, President and CEO of BILD, noted that today’s low sales figures could lead to a severe supply shortage in two to three years.
4. Current Market Conditions
The housing market in the Greater Toronto Area (GTA) is experiencing historic lows in new home sales. A recent report indicates that condo sales in the GTA have fallen by 60% year-on-year. June 2024 was noted as the second-worst June in the past decade for home sales, with only 732 high-rise units sold, just slightly ahead of June 2020. High-rise sales this year have reached their lowest levels in a decade, even compared to the initial year of the pandemic.
5. Contributing Factors
Several factors are contributing to the slowdown, including high interest rates and persistent costs related to housing construction—such as labour, land, taxes, and fees. Edward Jegg from Atlus Group highlighted that price and affordability are major concerns affecting new home sales.
6. Future Outlook
The data suggests that Ontario’s housing crisis may worsen before it improves. With high-rise projects requiring approximately 80% pre-sales before financing and construction can proceed, the current sales slump raises concerns about future housing supply.