Housing starts fell by 31% on average in Quebec in September, compared to the same period last year. A situation that echoes the rapid rise in construction costs and interest rates, which could have dampened the enthusiasm of property developers.
In a report released Tuesday, the Canada Mortgage and Housing Corporation (CMHC) reports an average increase of 19% in housing starts on average in urban centers across the country in September 2022 compared to the same month the last year. However, the picture varies greatly from one province to another. Thus, while Ontario and Alberta saw their housing starts increase by 40% and 59% respectively, they fell by 31% in Quebec, 49% in Manitoba and 59% in Saskatchewan.
This decrease of more than 1660 new constructions started last month in the Belle Province, compared to September 2021, occurs in a context of rapidly rising construction costs. In the second quarter of 2022, the residential building construction bill had increased by 15% to 25% compared to the same period last year, finds CMHC. This situation, combined with the labor shortage in this sector, could have slowed the pace of construction in several regions of the country.
“These are factors that made us anticipate a drop in construction in 2022, but there was also the rise in interest rates”, which increased the cost of financing real estate projects, notes the director of the service. Economics at the Association of Construction and Housing Professionals of Quebec, Paul Cardinal. A situation that could have prompted developers to delay – or even cancel – some of their real estate projects, believes the latter.
Thus, at a time when “it would normally be necessary to increase housing starts” to respond to the housing shortage in several regions of Quebec, “it is the opposite that is happening”, says Mr. Cardinal, according to whom the number of under construction is expected to “nearly double” in the province to meet current and future demand. ” It is enormous. »
The Montreal region has not been spared by this phenomenon, with its housing starts down 27 per cent in September compared to last year, all types of housing combined. This decrease is felt in all metropolitan areas of Quebec, except for Saguenay, where the number of new constructions jumped by 110% during the period analyzed.
The lure of the suburbs
In addition, in the Montreal area, the number of rental apartment starts fell by 16% in the first half of 2022 compared to last year, “but gains are still recorded in several suburban sectors” , notes the CMHC. We thus observe that “the very low vacancy rates outside Montreal are stimulating the construction” of rental housing in the suburbs, where several municipalities have less than 1% of rental housing that is not currently occupied.
“This shortage [de logements locatifs] undoubtedly continues to strongly stimulate housing starts,” analyzes the CMHC.
Thus, rental housing starts fell by 47% during the first half of 2022 on the island of Montreal, still compared to last year, while their number increased by 8% in its suburbs. This increase reached 17% in the booming Laval sector, while it averaged 5% on the North Shore as a whole and 7% on the South Shore.
Moreover, the increase in the attractiveness of rental housing could be explained by the significant increase in the acquisition price of properties which continued in the first months of 2022, thus making it “more difficult to access property,” says CMHC. The vacancy rate for rental housing is thus tightened in several municipalities in the greater Montreal area. “These factors therefore send the signal that we must continue to build new rental units,” concludes the federal agency.