Mortgage affordability flattened homebuying demand in Q1, highlighting importance of addressing restrictive mortgage rules to spur new supply

 

OTTAWA – April 30, 2024 – The Canadian Home Builders’ Association (CHBA) released its 2024 Q1 Housing Market Index (HMI) today, which showed a very negative builder sentiment for a seventh consecutive quarter, prior to the release of the federal budget. The HMI is a leading indicator about the health of the residential construction industry in Canada, and its ongoing lows were a continuing signal for poor housing starts ahead, and the need for change in government policy. The results speak to how important it was that the federal government come out with a strong housing budget and address restrictive mortgage rules.

While there was some improvement over sentiment in Q4 2023, as the expectation of easing monetary policy and the possibility of lower interest rates later in 2024 factored into builders’ assessment of current and future sales conditions, the Q1 HMI – which surveyed builders before the Federal Budget was released – remained low, pointing to lower starts in the year ahead. The single-family HMI was 34.9, up from a historical low of 24.6 in Q4 2023 and equivalent to what was recorded a year ago in Q1. The Q1 2024 multi-family HMI was 37.9, a slight rebound from last quarter’s index score of 29.1 and moderately above the 33.5 reported a year ago.

As of Q1, 54% of builders stated that they expect their housing starts in 2024 to be below their level of starts in 2023, and 65% of builders said that interest rates have directly caused them to build fewer units, with 31% stating they have cancelled projects. The federal government’s measure to introduce 30-year amortizations for first-time buyers of insured mortgages on new construction homes will go a long way in getting more young and new Canadians into the market, while spurring new construction.

“Without buyers, builders cannot build new homes. Allowing first-time buyers, who are typically younger and at the start of their earning potential, to access 30-year amortization periods is a game-changer for many who may not have been able to access a mortgage, and who do not have parents able to give them a large monetary gift for a down payment. It will help level the playing field for first-time buyers (given buyers with more than 20% down can already get a 30-year amortization period), and get more well-qualified people buying homes and freeing up the rental market. Equally important, it will allow builders to create much-needed housing supply, while not driving up prices in the resale market,” said CHBA CEO Kevin Lee.

The change was doubly important given that other headwinds beyond interest rates and mortgage rules still exist for builders. Most say municipal processes are a major limitation to construction, with one third of respondents stating it can take more than 6 months to receive a permit issuance. In addition, labour shortages result in delays for 29% of builders. Enabling more first-time buyers into the market and addressing these structural industry challenges will be an important part of improving affordability and creating more housing supply.

-30-

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.