London-area housing figures buck national trend in Ontario

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Greater London is bucking Ontario's housing construction trend, with new figures showing the region has seen more housing starts so far this year than in 2023.

According to the Canada Mortgage and Housing Corp., there were 416 housing starts in April in the London census metropolitan area, which includes Strathroy, St. Thomas and parts of Elgin and Middlesex counties. That brings the number of housing starts year-to-date to 1,358 units, almost double the 778 starts in the same period last year.

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The local figures contrast with the provincial figures, which saw a 37 per cent decline compared to the same month last year, as the housing market remains tight, the CMHC reported.

The downward trend in housing starts, which has also been seen nationally, is largely the result of fewer multi-unit housing starts, particularly in Ontario, said CMHC chief economist Bob Dugan.

“The multifamily volatility observed in Toronto, Vancouver and Montreal in recent months is not surprising, as last year's difficult credit conditions continue to be reflected in new multifamily construction numbers,” he said in a press release.

“We expect downward pressure to continue in these major centers.”

Locally, however, housing construction has been boosted in large part by the number of housing units built in the city. CMHC reported that of the 1,358 units under construction in Greater London, 1,100 are apartments.

Although a large proportion of the units currently under construction come from housing projects that have been years in the planning stages, they are still a positive boost for the city, says Jared Zaifman, executive director of the London Home Builders' Association.

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“We're fortunate this year that a lot of that construction is happening now and will certainly help us meet our housing goal this year, potentially setting us apart a little bit from other communities across Ontario,” he said.

“This may be a bit of a lagging indicator, but it also means we are putting buildings up and construction will be completed soon, providing more opportunity for people who need housing to move in.”

However, not all local numbers in the latest CMHC report are positive.

The number of single-family home construction starts has declined significantly; only 89 such homes have been built in the city so far this year.

London is not alone in this regard, says Mike Moffatt, assistant professor at Western University's Ivey Business School.

“This is a trend we're seeing across the province and it's largely driven by the inability of first-time homebuyers to get a mortgage right now,” he said.

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“Property prices are still quite high and with interest rates at their highest levels in 20 years, it's very, very difficult for a new buyer to get into that market. So we've definitely seen that market dry up.”

Falling demand due to higher interest rates is not the only factor driving down the construction of single-family homes in London. Moffatt estimates the development cost for such a property will be about $47,000, up $42,000 from 20 years ago. These factors, combined with higher land costs, create a difficult environment for construction, he says.

Although inflation in Canada slowed to 2.7 per cent in April, raising the likelihood that the Bank of Canada will cut interest rates in June, a single rate cut may not be enough to boost construction in Ontario, Moffatt said.

This puts the province in a position that makes it almost impossible to meet its housing goals of 125,000 units built in 2024 and 150,000 in 2025. Its goal of 1.5 million units built by 2031 is also even further away.

“I think we need to see two to three cuts before we really see movement in this area,” Moffatt said.

“We're not going to meet those goals in the next few years, and I think it's going to be increasingly difficult to meet that 10-year goal just because we're already falling so far behind.”

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