May 25, 2006

Multi-unit residential building soars

VANCOUVER

Canada’s multi-year boom in multi-unit construction is showing no sign of letting up, even as reduced affordability and rising land costs have begun to dampen construction of single-detached family homes, according to the latest Real Estate Trends from Scotia Economics.

“Ground was broken on more than 105,000 multi-unit dwellings last year, up slightly from 2004 and more than double the level of a decade earlier,” says Adrienne Warren, Senior Economist, Scotia Economics.

“Construction of single-detached homes fell seven per cent to 120,000 units. We expect these trends to continue in 2006, with multiple-unit starts holding steady and singles declining for a second consecutive year.”

Multiple-unit housing developments — apartments/condominiums, townhouses and semi-detached homes — are becoming an increasingly dominant fixture of Canada’s residential construction landscape.

Multi-unit projects accounted for 47 per cent of housing starts in 2005, compared with 37 per cent at the start of the current housing cycle in 1998.

“Rising home and land costs are making more affordable housing options such as condominiums and townhomes increasingly attractive, particularly for first-time homebuyers,” adds Warren. A similar shift in favour of multi-unit construction generally emerged at the later stages of prior housing cycles in Canada.

A gradual shift toward higher-density forms of housing has been under way for several decades in Canada. Multi-unit housing accounted for almost 20 per cent of owner-occupied dwellings in 2001, up from 16 per cent in 1991 and just 13 per cent in 1971.

“Multiples, no doubt, account for an even larger share of both owner-occupied and rental housing today,” comments Warren.

The growth of Canada’s largest cities is one factor behind this longer-term shift, as multi-unit home-ownership is primarily an urban phenomenon.

Other factors include the shrinking average size of Canadian households and changing lifestyle preferences, with both young professionals and empty nesters attracted to the prospect of shorter commutes and proximity to downtown cores that frequently comes with mid- and high-rise living. In addition to homeownership, condominiums and other multi-unit dwellings represent an entry-level investment for Canadians looking to diversify their portfolios.

Housing preferences vary considerably across Canada’s regions. In B.C. and Quebec, for instance, roughly one-quarter of all homeowners in 2001 lived in a multi-unit dwelling. The comparable rate of multi-unit homeownership was only one in 10 in Saskatchewan and PEI, the two provinces with the highest incidence of single-detached homeownership.

“Looking ahead, the aging of Canada’s population, combined with the continued movement of the baby boom echo generation into the rental and homeownership market, is expected to further raise the popularity of multi-family housing,” says Warren. “Condo purchases are highest among Canadians aged 20-29 and those 55 and over.”

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