Here’s how high interest rates are impacting Canada’s condo demand
Global News
Builders in Toronto and other major cities are feeling less confident about condo projects and are scaling back development plans as interest rates and building costs rise.
Rising interest rates and other headwinds in the construction industry have pushed builders in some Canadian markets to shelve condominium projects, while others say condo demand will hold up as supply remains tight.
Real estate consulting firm Urbanation released a report this week showing that builders in the Greater Toronto Area (GTA) are slashing the number of condo units they expected to launch this year.
Based on inputs from developers at the start of the year, Urbanation had projected that 35,000 condo units would be available for presales through 2022. In its Q2 report, it said that while some 16,000 units had indeed been put up for sale in the first half of the year, it now only expects 10,000 more units to launch before 2023.
Urbanation expects around 10,000 anticipated units will be delayed or cancelled.
Though the GTA is right now experiencing an all-time high of roughly 123,654 condo units currently in presales or under construction, Urbanation president Shaun Hildebrand tells Global News that the slowdown in launches reflects diminishing buyer confidence in the “future of the housing market.”
The dour outlook isn’t limited to Toronto. The Canadian Home Builders’ Association (CHBA) said in its latest Housing Market Index (HMI) that there’s been a stark drop in developer confidence over the first half of 2022.
The HMI measures the confidence of Canadian residential builders on a 100-point scale. While the index posted all-time highs near 90 for both single- and multi-family homebuilding in the first quarter of 2022, the second-quarter report released in mid-July showed sharp declines down to 65.7 for single homes and even lower to 59.9 in multi-family, which includes condos.
The CHBA pointed to labour shortages and rising interest rates for dampening confidence, but noted that the Bank of Canada’s latest 100-basis-point increase would not yet have been factored into the data.
