Statistics Canada recently released its quarterly report on residential construction investment, announcing a significant year-over-year increase.
In total, $35.8 billion was invested in residential construction in the third quarter of 2017, which is a 9.1% increase compared to the same period last year. This is also the largest increase since the fourth quarter of 2012.
For the first time in five years, investment was up in every province, led by Ontario, Quebec, and British Columbia. Ontario was in a distant lead with $14.7 billion invested, more than 40% of the country’s total investment. Quebec followed with nearly $7 billion and British Columbia had $5.6 billion.
Investment in the construction of single detached homes increased 11% to $8.4 billion, and there was a notable increase in rowhouse construction investment, hitting a record high of $1.6 billion.
Rowhouses (townhomes) accounted for only 20% of total spending in the multi-unit sector, but these units represented more than 50% of the year-over-year investment increase for multi-unit construction in total.
Renovations were also up in all provinces for the first time since the second quarter of 2006, increasing 8.1% to $15.5 billion. With more than $614 million invested in renovations in Ontario, this form of construction was one of the main drivers in the province.
So, why are we seeing record high renovations and spending on townhomes? We can’t speak for the rest of Canada, but here in Ontario and the Greater Toronto Area (GTA), housing affordability is an issue.
High prices for detached homes could be pushing more buyers into the townhome market. People need to upgrade from their small one-bedroom condo units, but detached homes are too expensive. Even the average new townhome in the GTA these days comes close to $1 million.
Some homeowners looking for more space seem to be deciding to stay put and renovate as opposed to buying a larger home. Since upgrading to a larger detached home may be hard on the bank account, it might make more sense for some households to see what’s possible with their savings and their current property.
With news that the GTA’s housing market may become even less affordable, we may see even more money invested in the construction of townhomes and renovations, as well as in the high-rise sector.