Canada’s homebuilding pace ramps up — but here’s where arrears risk grew – National

The pace of housing starts in Canada last month were up by about eight per cent compared to September, according to the Canada Mortgage and Housing Corp.

But not all areas saw the same growths, with annual year-to-date housing starts in Ontario down 18 per cent and 11 per cent in B.C., as the agency also warns of a potential rise in mortgage arrears.

The country saw housing starts in October reach 240,761 units, an increase from the 223,391 seen in September.

A driving force behind this increase was the urban centres, the CMHC said, which were an average six per cent higher compared to last month.

“Despite these results, we remain well below what is required to restore affordability in Canada’s urban centres,” Bob Dugan, the CMHC’s chief economist, cautioned in the report.

According to the numbers released, actual year-to-date housing starts saw higher activity in Alberta, Quebec and the Atlantic provinces compared to the same period in 2023.

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Ontario housing starts fall once again

At the same time, the CMHC is warning there could be an increase in mortgage arrears in the next six to 12 months, with the more significant risks in Toronto and Vancouver.

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The housing agency, which used data from Equifax and looked at nine major Canadian cities, says one of the main reasons behind this is the impact of the cooling housing market.

“When sales activity slows, signalling a ‘cooling’ market, homeowners struggling with mortgage payments have fewer options to sell and avoid falling into arrears,” the CMHC analysis notes.

The CMHC says another finding in its analysis that may predict a rise in mortgage arrears are from things like credit cards and auto loans.

The agency suggests when financial pressures began, homeowners prioritized their mortgages over other debt. However, within six to 12 months, pressures on homeowners from the cost of living and unemployment rates mean that number may rise, CMHC said.

When it came to which cities could see a rise in arrears, Toronto and Vancouver were seen as the biggest likelihood as the national housing agency noted the high number of listings relative to sales was keeping some homeowners from selling their unit as they struggled with cost. Combine that with other rising debt, it could create the “conditions likely to result in increasing arrears in the future.”

Meanwhile, Calgary, Saskatoon and Halifax are expected to see their mortgage arrears remain low, while Winnipeg appears stable.

One way to avoid arrears, the agency suggests, is if mortgage rates decrease more than anticipated, or if the market conditions revert once more into sellers’ market territory.

The CMHC’s deputy chief economist, Tania Bourassa-Ochoa, told Global News it’s anticipated the policy rate cuts could put a bit of momentum into the economy, which could limit the increase in arrears, though noted households were in a “more vulnerable financial position than they were before.”

—with files from Global News’ Craig Lord

© 2024 Global News, a division of Corus Entertainment Inc.