Housing starts hit record high in 2023

CMHC expects record growth to continue for next few years, with demand building for multi-family homes.

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Calgary’s resale real estate isn’t the only housing market on a hot streak since the pandemic.

The city’s new homes market is also red hot.

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“Calgary saw a record year in 2023 for home starts,” says Adebola Omosola, a housing market specialist with Canada Mortgage and Housing Corp. What’s more, the federal crown corporation released its Housing Market Outlook in April, forecasting potential record growth this year, and in 2025 and in 2026. CMHC’s Housing Supply Report, also released last month, reveals that Calgary’s new homes market will be building on a very strong 2023 when starts grew 13 per cent over 2022.

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All told, the city saw a record 19,579 starts with the largest percentage rise for row housing, up 33.5 per cent.

Apartment starts, making up half of all new home activity, saw starts rise nearly 17 per cent while single-family detached home starts increased about two per cent.

“More demand moved into the multi-family segment” as buyers became more price sensitive amid higher interest rates on mortgages, Omosola says.

The preference is also reflected in inventory of completed and unsold homes. While supply in 2023 overall was about the fourth lowest in the last decade, apartment inventory was the lowest it has been over that span. In contrast, new single-family detached home supply was among the highest it has been.

Omosola adds developers are also building more new rental units, with 54 per cent of all new apartment starts in 2023 for the rental market.

The shift in new housing, focusing more on multi-family, is a growing trend in most major cities, says Omar Eltorai, director of research at Altus Group, which recently published its commercial real estate market survey.

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“There are still clouds over the economy regarding recession risk, but the housing market remains super tight, and you’re seeing that come through with expectations for multi-family rental.”

The gloomy overall outlook aside, Alberta is a bright spot for new home construction due to its economic strength and relatively lower cost of housing compared with Ontario and British Columbia, says Ray Wong, vice-president of data solutions at Altus.

“We’ve seen a lot of demand on the townhome side.”

He adds that, despite being a much less pricey market than Toronto and Vancouver, Calgary is increasingly affected by rising home prices and higher borrowing costs.

CMHC statistics in 2023 reflect this trend with row home completions up 56 per cent year over year in the city.

The forecast for this year is for a continued rise in multi-family construction. CMHC predicts starts could increase to as high as 15,000 this year — breaking last year’s record of 13,704 starts. For all housing, the city could see 22,000 starts, and CMHC predicts starts may continue to rise in 2025 and 2026, setting new market highs.

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That said, if rates remain higher for longer and the economy struggles, starts could falter with the outlook, for example, forecasting multi-family starts could be as low as 13,000 this year.

Yet even activity for single-family detached homes is forecast to rise this year with as many as 7,000 starts compared with 5,875 last year.

Single-family home start growth, however, is highly dependent on lower financing costs, given the average price of a new home in April exceeded $800,000.

“We might see growing demand for single-detached homes, but that’s more subject than any other housing type on interest rates coming down,” Omosola says.

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