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Despite Demand, Investment in Residential Building Construction Declines

In today’s Konfidis Insights we profile Statistics Canada’s recent October 2022 Investment in Building Construction release. This data presents the spending value of building construction by households, enterprises, and governments for buildings (excluding the value of land). The investment data for residential and non-residential building construction gives a detailed statistical image of this activity across Canada, including the provinces and territories, and census metropolitan areas (CMA). Investment in new residential buildings data is provided for four principal dwelling types (singles, doubles, rows and apartments) and is based on data from the Building Permits Survey (StatsCan) and from the Canada Mortgage and Housing Corporation (CMHC) for starts and completions data for the residential sector.

 

Investment in building construction, October 2022


Nationally, investment in building construction in October was largely steady, up 0.2% to $20.9 billion, with Ontario accounting for nearly all the gains. The residential sector edged down 0.1% to $15.4 billion, while the non-residential sector increased 0.9% to $5.5 billion.


Figure 1: Month-to-month change in residential construction investment (seasonally adjusted)

Table 1: Total investment, millions of dollars (seasonally adjusted).

Figure 2: Investment in new residential construction, market share and year-over-year change (not seasonally adjusted).


Statistics Canada: Single family and multi-unit investment head in opposite directions


Investment in residential building construction was down slightly by 0.1% to $15.4 billion in October.


Single family home investment decreased 2.3% to $8.2 billion in October, with nine provinces reporting declines. This was the largest monthly decrease for single family construction since July 2021. On a constant dollar basis, this was the eighth consecutive monthly drop after its historic peak in February 2022.


Multi-unit construction investment increased 2.5% to $7.2 billion, with Ontario (+8.6%) accounting for most of the growth. This was the province's largest recorded monthly increase since June 2020.


Konfidis Analysis: Ontario Spotlight


Similar to the above, while total residential building construction across Ontario has been relatively steady over the past decade, the data presents an interesting trend of declining single-family building investment in conjunction with increased multi-family investment.




This trend is exacerbated in Toronto where total investment in residential multi-family building construction actually surpassed (and remains greater than) single-family investment in (and since) 2018.




A similar trend is visible in Ontario’s secondary markets, such as London.



Konfidis Insights


The continued trend of reduced investment for residential real estate is in stark contrast to the accelerating demand for housing, especially when considering the market for single-family homes in Ontario’s secondary markets.


With this backdrop, Konfidis continues to see a very compelling landscape for single-family rental ownership in Ontario’s secondary markets as the long-term supply and demand fundamentals that support strong home price appreciation and inflation protection.


Source: Statistics Canada - Investment in building construction, October 2022 (here)



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