Multi-family builder sentiment lowest since early 2021, single-family not far behind as home sales in Canada continue their downward slide
OTTAWA – January 29, 2025 – The Canadian Home Builders’ Association (CHBA) 2024 Q4 Housing Market Index (HMI) shows further decline in the sentiment of Canada’s homebuilding industry, a result of current poor selling conditions for both single-family and multi-family homes through Ontario and British Columbia, with other areas of the country also dipping since the previous quarter, and a weak outlook for the near future. CHBA’s HMI is a proven indicator of housing starts that can be expected in six months and beyond, signalling that housing starts, especially for ownership, will not be increasing to meet the supply needed to overcome affordability challenges that are driven by a lack of options.
The single-family HMI slid another 2.5 points nationally from the previous quarter, down to 25.1, which is just 0.5 away from its record low. The multi-family HMI did reach a record low, dropping 6.5 points from the previous quarter to 22.0, which is 4 points below the previous record low in the fourth quarter of 2022.
Sales of new homes (and therefore the sentiment of builders) are far healthier in regions of the country where ownership cost-to-income ratios are lower, reflecting better affordability. Ontario’s multi-family HMI reached a new low of 6.2, and British Columbia’s single-family index is similarly alarming at 10.5. While the situation is not as dire in the Prairies, where the year finished at a neutral sentiment range, the multi-family HMI there did fall over 10 points from the previous quarter. The single-family HMI for Atlantic Provinces fell for a second consecutive quarter, and while still a neutral reading, their HMI is 6 points lower than a year ago.
When asked the open-ended question of what their business’s top challenge will be in 2025, 19% of builders directly stated the high cost of construction. Municipal government taxes and lengthy approval timelines are adding considerably to the cost to build a home and keeping home prices elevated. The forthcoming update to CHBA’s Municipal Benchmarking Study will provide local context of progress made, or lack thereof, since 2022 in municipalities across the country.
Although the Bank of Canada delivered a fifth consecutive rate reduction in December, mortgage interest rates are only falling about half as fast as the Bank’s rate, and roughly a third of builders said rates need to further lower to improve their outlook on future sales. The current political and tariff uncertainty is also further hindering builder sentiment, and may be depressing buyer demand in some parts of the country. Builders reported that non-lumber material costs have added $36,000 to the cost of constructing a 2,400 square foot home relative to just the end of 2023. Softwood lumber, which is used for framing, has gone up between 10-18% in the last year.
“Although the federal government has correctly recognized that we are in a housing crisis and we need to double home construction starts in order to correct the supply shortage and help improve housing affordability, conditions have not enabled home builders to ramp up. Builders across the country are keen to build, but with no buyers, and with increasing costs of construction, including development taxes, they simply cannot build. Sadly, the majority of HMI respondents reported that they had fewer housing starts in 2024 than they did in 2023 – a reduction of 50% on average, reflecting the drops we are seeing in builds for homeownership. Interest rates need to keep coming down and be reflected in mortgage rates, and the stress test needs to be more fluid. Importantly, government policy at all levels should focus on decreasing taxes on new homes, reining in runaway development charges, and eliminating costly lags in development approvals,” said CHBA CEO Kevin Lee.
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MEDIA INQUIRIES
Journalists wishing to interview Kevin Lee, Chief Executive Officer of the Canadian Home Builders’ Association are encouraged to submit their request by email to media@chba.ca.
About the HMI
CHBA’s HMI provides a leading market indicator for both the single-family and multi-family markets in Canada, before permits and starts. Released on a quarterly basis, the HMI provides insight into the industry, including many of the issues that are affecting housing affordability, with a strong correlation to future housing starts. The data for the CHBA HMI comes from an exclusive panel of hundreds of CHBA home builders and developers from coast to coast. Every quarter, this panel responds to a series of questions about market conditions. CHBA then uses proprietary statistical analysis to prepare the quarterly HMI. In addition to the standard HMI questions, each quarter CHBA asks “special questions” that allow the Association to gather data and insights into current issues affecting the industry across the country.
For more information on CHBA’s HMI, including the detailed methodology and key takeaways, please visit the official CHBA HMI webpage.