New Home Construction Outlook amid Economic Shifts

By Tyler Holt

In 2023, the Canadian construction industry experienced a contraction due to several economic factors, including the skilled labour shortage, which drove competitive wages and contributed to pushing overall costs up. New home construction saw a decrease in new project starts, contrasting with the exceptional growth seen in 2022.

To evaluate the health of the residential construction industry in 2024 and beyond, we looked at Statistics Canada’s database on investment in building construction. We also considered key industry forecasts from BuildForce Canada and Canada Mortgage and Housing Corporation (CMHC). The data suggests that while the overall trend is upward, construction is currently slowing down. However, CMHC, along with market sources, predict a gradual recovery for the industry this year.

New Construction and Renovation
Economic recovery from the Covid-19 pandemic drove a surge in both renovations and new housing starts in 2022. This boom was so acute that investment in new construction actually peaked above investment in renovations for the first time since data was first recorded in 2017. Subsequently, the market cooled down in 2023, and saw a national seven per cent drop in new home construction. Rising labour and materials costs as well as inflation were all factors. However, CMHC’s 2023 housing market outlook forecasts residential construction will begin to slowly bounce back toward the latter part of this year. Statistics Canada reports that building costs have been decelerating since 2023.

Thinking a little more long-term, a 2023 report from BuildForce looks at Canadian construction and labour markets for a 10-year forecast period from 2023-2032. It predicts that by 2030, there will be more people employed in renovation and maintenance sectors than in new home construction. This will be driven partly by aging populations converting and retrofitting existing dwellings to age in place.

Single-Family Homes and Multi-Family Units
While national housing starts were down seven per cent last year, it was single-family homes that saw the brunt of this decrease. Statistics Canada reports that in certain major urban centres like Vancouver and Toronto, new home construction was actually higher in 2023 than 2022, as a result of local increases in multi-unit projects. Census data suggests the gap between single-family and multi-unit housing will continue to widen, with both types of housing increasing, but the latter gaining much more traction, while the former decelerates.

The continued boom in new multi-unit projects is a reflection of the glaring gap between renters and homeowners in Canada. As of late 2022, Statistics Canada reports that owner-occupied housing has been in steady decline for over a decade. Its 2021 housing survey found that renters were more than twice as likely as homeowners to be living in unaffordable housing. Even so, BuildForce’s 2023 report on construction and maintenance notes that national demand for both multi-unit and single-detached housing is strong, predicting that the growth of new starts will continue to climb through 2029. So, while housing affordability is undoubtedly in crisis, the health of the construction industry itself is expected to remain stable and relatively prosperous for the foreseeable future, even in the case of single-family residential construction.

As we look at 2024 and beyond, the Canadian construction industry stands in a sort of limbo — growing, but slowly, and not nearly enough to keep up with demand. Economic factors, notably the skilled labour shortage and escalating building costs, have cast a shadow over the residential construction sector. Despite this, projections from organizations like BuildForce, CMHC and Statistics Canada offer a glimmer of hope, predicting a gradual recovery in the coming years. The shift toward renovation and maintenance sectors hints at evolving trends in housing preferences and demographics.

Tyler Holt is the editor of Wood Industry magazine, a Mediaedge-produced publication. He has a master’s degree in literation and publication, and years of experience in the publishing and digital media industry.

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