New-home starts eased over 2018 levels due to pullback in both detached and semi-detached activity. However, further gains occurred in the apartment sector, mostly due to condominium construction.
Product under construction and in inventory increased. Supply choice in the new-home market contributed to the overall excess supply in the housing market last year and is impacting prices in the resale market.
Due to an environment of rising lending rates and slower growth, new-home starts are expected to slow further in 2019.
This will help reduce the amount of additional supply pressure in the market.
With the current pace of construction, and expectations of new households forming, it will take some time for the new-home supply to ease to more normal levels. This will affect home prices well into 2019.
New-home construction – A quick summary:
- The amount of product under construction has risen, mostly due to growth in higher-density product. As of December 2018, 81 per cent of all product under construction was multi-family, with apartment-style product accounting for 7,155 of the 11,452 units under construction.
- The majority of apartment construction remains targeted to condominium ownership, but there has been a rise in the amount of rental-apartment construction, accounting for 2,489 of the 7,155 apartment units under construction.
- New-home inventories rose to new highs in 2018. In December, there were 2,105 units completed and in inventory. Of those, 915 were apartment condominium product.
- 2018 starts were 10,971 units. This is a 4.9 per cent decrease over the previous year. In 2019, levels are expected to ease slightly due to a pullback in multi-family starts.
- Many new-home builders have become more aggressive with their pricing to pull available consumers toward new products rather than resale homes. Price adjustments in the new-home market can affect resale home prices in areas that are near new developments.