Toronto's Construction Slowdown: What the Latest Numbers Really Say

Here is my monthly roundup of the news that matters for anyone living in Canada or keeping an eye on the housing market. Some of it is about the wider economy, some about what builders are doing right now, and some about the people trying to buy their first home. I read through the reports so you can see the signals in one place.

Canada's Economy Found a Little Growth Again

After three flat or shrinking months, Canada's GDP grew again in July. The economy expanded by 0.2%, and most of that came from mining, manufacturing, and wholesale. A gain of 0.2% is not a big number, but the fact that it is positive at all really matters. In the second quarter of this year the economy had shrunk by 1.6%, so a lot of economists were watching the July data closely to see whether the third quarter would go negative too. Two negative quarters in a row is what people call a technical recession. Early figures for August suggest we probably did not grow much, but we did not fall off a cliff either. Preliminary numbers are never exact and can change later. Reuters analysts had expected growth of just 0.1%, after the economy contracted 0.1% in June.

What the Rate Cut Path Could Mean

BMO expects the central bank to cut rates in October, and then to make a 0.25% cut in December and another in March. So even this small amount of growth can shape the Bank of Canada's decisions. Keep in mind that the central bank really does not want to bring rates down, because it worries inflation could become a problem again. That tension is worth remembering every time you read a headline about rates. A cut is never guaranteed, and the bank moves carefully.

Record Permits, But Construction Has Stalled

Knowing how many building permits get issued helps us predict where the market is heading, because permits that actually get built turn into supply. A report from Desjardins shows that new construction starts fell sharply last month, while building permits hit a record. In other words, the appetite to build is there and many people are pushing to clear the paperwork, but getting a permit does not mean they start building right away. In August alone about 35,000 units were approved, a historic record, yet new project starts fell to around 245,000 units. That is 16% lower than the month before. The gap between permits and actual starts has never been this wide.

A Pile of Finished Homes With No Buyers

The number of newly built homes that are finished but have no buyer has reached its highest point in years, and that is a big reason projects are not starting. Right now around 12,000 residential units are ready and sitting unsold, roughly 50% above the long-term average. Usually most homes were bought by investors before they were even built, but this time that cycle has broken down too. Builders are left with a mountain of finished homes and no buyers for them. There is a flip side worth noting. When construction slows this much, the units meant to be delivered a few years from now shrink in number. So down the road we could see extra demand for housing with very little ready to hand over.

What First-Time Buyers Actually Want

The last report looked at first-time buyers in Toronto and how they think about buying. About 13% of Canadian adults plan to buy their first home in the next two years, and most of them want to do it in the next 12 to 24 months. More than half, around 53%, want to put down at least 20% of the price in cash. About 41% of first-time buyers say they will get financial help from family or friends, basically a gift, while 51% say they will get no help at all. Detached single family homes are still the most popular choice, and beyond price the thing that matters most is that the home is move-in ready, so they do not have to take on major repairs or renovations.

It helps to know exactly what the numbers are telling us. A headline might shout about record permits, but the real signal is whether projects actually start. If you want to talk through what all of this means for your own plans, fill out the form at the bottom of this page or book a free consultation. Stay well and take care.