As interest rates continue to rise, construction and home sales in London, Ont., progress at middling and different rates.
According to the latest Canada Mortgage and Housing Corporation (CMHC) report, single-home construction in London is down year-over-year.
The report outlines that construction of single-detached homes was down 62 per cent in January compared to 2022. While 92 single-unit homes began construction in 2022, only 35 got underway last month.
This puts the standalone monthly seasonally adjusted annual rate (SAAR) of single home construction down 21 per cent compared to December 2022. The trend measures a six-month moving average of the monthly SAAR of total housing starts.
Chris Zakher, a senior analyst with CMHC, says multiple groups will have to put in the effort to further improve housing construction.
“It’s certainly important that all housing industry stakeholders, whether it be from the government level or private industry, everyone kind of has to work together in order to ensure housing starts can grow to a level that enables people to enter the market,” Zakher told Global News.
London city council recently pledged the city to have 47,000 new housing units built by 2031 to help meet provincial targets.
While single dwelling has had a slow start to the year, semi-detached townhouse or apartments has done much better.
Non-single unit construction is up both year-over-year and over the six-month average. Two hundred and eighty-five non-single dwelling homes began construction last month. That helps raise the six-month average by 104 per cent.
Zakher says the increase in multi-dwelling homes has been a trend since 2019 and is related to a growing need for rentals in London.
“There just isn’t enough rental supply in the local market to satisfy demand,” said Zakher, adding the latest rental report shows a 1.7 per cent rental vacancy for apartments, which he called “quite low.”
Nearby Kitchener-Cambridge-Waterloo saw significant rises in construction, especially with multi-units.
Kitchener-Cambridge-Waterloo saw an 82-per cent jump for single dwelling year over year and a whopping 324 per cent year-over-year for multi-units.
David Carruthers, CMHC’s market analyst for Kitchener-Cambridge-Waterloo, says that the high numbers can’t be taken too strongly without looking at the long-term trend, which does point in the direction of growth for the area.
“We at the CMHC believe that a major cause for the affordability challenge we are seeing across the country is certainly a lack of supply,” said Carruthers.
“We are interested and encourage when we see high levels of house starts in these areas so we can continue to add supply to the rental and ownership market.”
Meanwhile, home sales in London stayed roughly the same in January compared to the end of 2022. The Canada Real Estate Association (CREA) shows that the home price index for London and St. Thomas rose only 0.3 per cent compared to December 2022.
Compared to one year ago, the home sale market has dropped by 22 per cent for London and St. Thomas.
The Bank of Canada has raised its key interest rate eight consecutive times in the past year to tamp down on inflation. It most recently raised its policy rate last month by 25 basis points to 4.5 per cent, the highest since 2007.