Canada’s housing starts in December fell to 236,100, a drop of 22.3% from November because of material shortages following the floods and landslides in British Columbia that kept construction materials stranded at the Port of Vancouver, according to data released by the Canada Mortgage and Housing Corporation on Monday.
The drop is unsurprising given that December is often a slow month made worse this time around by the continued supply chain struggles.
The decrease in starts stems from the decline in multifamily housing, which fell by 28% from November, while single-detached housing starts fell by 3%.
Despite the slowdown, the housing market remains strong by historical standards.
Developers may have little reason to slow down given that last year was the strongest ever for the Canadian housing market, with demand far outstripping supply, leading to an increase in housing prices by an astonishing 21%.
Sales went up by 20% last year while listings did not keep pace, with a 9% increase, creating a competitive market for buyers, who increasingly comprise developers rather than single buyers. The dwindling supply of housing sent buyers into a bidding frenzy, with some putting down all-cash offers while others were effectively shut out of the market.
The post-flood rebuilding and recovery in British Columbia might improve the supply chain and ease material shortages, allowing more projects to start in the upcoming months.
The shortage of construction workers, however, is projected to continue amid a national heated labor market, which could be the main constraint on construction projects. And the impact of the omicron variant’s spread remains an open question.
Still, construction will need to continue to be strong to meet the increasing demand from Canadian buyers.