New Construction Slows Across Canada in April
Does it seem fewer cranes are crowding the city skyline these days? It may not be your imagination – the latest numbers on new construction in Canada have been reported for the month of April, and they show fewer builds are occurring nationwide. According to the Canadian Mortgage and Housing Corporation, new starts dwindled across Canada to 182,754 units last month, compared to 188,369 in March.
Multiple starts, such as apartment and condominium construction, have decreased 3.5 per cent nationally, to 93,469 units. This is proving most apparent in the once sizzling urban condo markets of Vancouver and Toronto, with the latter experiencing a 55 per cent drop in sales over the first quarter of the year.
Would-Be First Timer Buyers Shying Away From Condo Market
It’s been noted that urban condo markets have been affected most by the impact of new lending restrictions introduced by the CMHC last summer. The new rules, which limit the maximum amortization to 25 years for buyers putting less than 20 per cent down on their mortgages, priced some would-be buyers out of the market. The first timer segment – a prominent force in the condo market – was hard hit by the new restrictions. Many resorted to renting while continuing to save their down payments, resulting in softening condo sales, evident by shrinking rental vacancies in Toronto’s downtown core.
Developers Are Cautious About New Construction
The slowdown has thrown a wrench in developers’ plans for upcoming urban development. Once racing at breakneck speed to raise tower after glass tower, the uncertain buyer conditions have led to the delay of many major projects.
In fact, there has been a 41 per cent decrease in the number of new condo projects started, with only 7,951 launched nationally last month – compared to 13,458 last year, according to the CMHC.
Condo Credit Is Hard To Come By
First time buyers aren’t the only ones struggling with adequate financing – many condo developers are feeling the pinch as lenders hesitate to provide necessary funds for construction.
The conundrum is presented by a lack of buyers in the early stages of project financing. New condo starts require a combination of capital raised from pre-sold units, along with lender loans to finance the remainder of construction. As banks prove wary of increasingly uncertain market conditions, developers are left scrambling for new monetary resources – and they’re putting existing plans for construction on ice.
Week In Review
The May edition of the Mortgage Rate Outlook Panel has been released – and a mortgage rate shakeup is not anticipated by our experts. Efforts by the Department of Finance to stem household debt levels continue to target low mortgage rates, and it’s unlikely that lenders will challenge the status quo by lowering their fixed rates further. Variable mortgage rates are also stable for the time being, as no change is expected in the next Overnight Lending Rate Announcement on May 29 – Mark Carney’s last!