Ontario real estate downturn continues as developers drop new projects

The rebound of the housing market in the GTA and Ontario at large has been slower-going that realtors and other stakeholders were expecting, and with the market still overrun with a glut of unsold condos in particular, new development is increasingly taking a hit alongside sales activity.

Dozens of complexes that were due to create tens of thousands of new units have been shelved in recent months, largely due to trepidation from buyers who feel prices and interest rates are still far too high for comfort.

Add in the combination of increased building costs, taxes and development charges, and you've got the current situation, which was further emphasized in the latest report from the Canada Mortgage and Housing Corporation (CMHC), released Tuesday.

The Crown corporation's summary of new housing starts nationwide — based on a seasonally adjusted annual rate, or SAAR — shows that in August, developers backed off substantially, breaking ground on 22 per cent fewer projects than in the previous month and 24 per cent compared to the same time last year.

How new residential starts in Canada have changed over time, per CMHC's most recent report on the subject.

The hardest-hit sector has been, predictably, not detached homes, but townhomes and condos, which are not proving worth the investment for would-be residents, and certainly not for investor-owners at least compared to what they once were. (More than 80 per cent of condo investors in the Toronto area are now thought to be losing money on new units.)

This trend is worst in the provinces with the country's most expensive urban centres, Ontario and B.C., where the CMHC writes that "year-to-date starts have decreased across all housing types," which is a contrast to Quebec, Alberta and Atlantic Canada, and especially concerning as "higher levels of construction are needed to restore affordability in Canada’s urban centres."

CMHC chart of new housing starts nationwide in August 2024.

Per the data, while starts actually increased 6 per cent from August 2023 to August 2024 for for single-detached homes in Ontario, starts for all other housing types fell a whopping 32 per cent, from 5,893 to 4,004 provincewide.

On the flip side is Newfoundland and Labrador, where single-detached starts were up 52 per cent year-over-year, and starts for all other housing types, +76 per cent.

Actual year-to-date housing starts in Toronto specifically are down 14 per cent from 2023, though the CMHC does note that last year was especially busy for housing starts by historical standards.

It also adds that analyzing using its key metric, SAAR, "can be misleading in some situations, as the multi-unit segment largely drives the market and can vary significantly from one month to the next."