Some Halifax Developers Are Hitting Pause On Big Projects. What Does It Mean?
HALIFAX—Some Halifax developers are hitting pause on major projects in the city thanks to Covid-19, and a Halifax economist says that has some interesting implications for the city’s housing market.
According to the Canadian Mortgage and Housing Corporation, the number of new multi-unit developments started in the city this year has dropped significantly compared to the same period in 2019.
By the start of June this year, developers had started construction on 577 multi-unit dwellings. That’s a 36 percent drop from the 872 they has started by June 2019.
Kelvin Ndoro is a senior market economist at CMHC, based in Halifax. He says multi-unit buildings usually take a while to build so their housing starts numbers “tend to [highlight] the long term trend.”
“So when we see an uptick in multi-unit or apartment construction that’s a sign of confidence that developers have in the population dynamics of an area,” he explains.
He says the decline in multi-unit housing starts over the first half of the year in Halifax likely means developers are holding off on big projects until they have a better handle on what the long-term impacts of Covid-19 will be on the city’s economy.
“I’m not saying it’s definitely the case, but it could be a sign from developers who are trying to play a wait-and-see game. They’re asking, how is [Covid-19] going to affect us long term? Should we continue this project, or should we hold off on it and divest?”
‘A dip from a very high point’
CMHC numbers show a slowdown in multi-unit construction in Halifax. But look around the city and you’ll still see plenty of shovels going into the ground.
Ndoro says that makes sense. While some developers have chosen to hold off or pursue other projects, he says many still have confidence in the market.
He points out that Halifax has seen significant population growth over the past three or four years — largely thanks to international and inter-provincial migration — and that “developers would have seen that and they invest in that.”
“We also have to take that dip in multi-unit construction with a caveat that the last two years we have seen some of the highest levels of construction,” Ndoro says. “So far we’ve seen a little bit of a dip in construction, but it’s not necessarily a negative story, it’s just a dip from a very high point.”
Ndoro also points out that the construction of single-detached units (your standard family house) in 2020 has wildly outpaced last year in Halifax, even during the pandemic.
The CMHC says 342 single-family homes were started from January to May 2020, which is a full 40 percent higher than last year.
Ndoro says that shows there is still some confidence in Halifax’s housing market. After all, people wouldn’t be building houses if they didn’t think they could sell them.
Market rebound tied to border closures
Overall, the construction of new homes in Halifax has remained fairly steady in 2020, and the price of single-family homes has continued to go up throughout the pandemic.
The CMHC says that will likely change later this year.
In its latest housing market outlook, the CMHC predicts housing starts across the country will fall off anywhere from 51-75 percent this year before they start to recover in the second half of 2021 “as economic conditions gradually improve.”
But in Atlantic Canada and Halifax specifically, those declines won’t be as severe because the region’s economy won’t be as hard-hit as others in Canada.
Ndoro says the recovery of the market here will depend on how quickly people can get back to work and how much debt they rack up during the Covid-19 shutdown.
“Debt levels could have a great negative impact on housing, especially if sales drop as a result of many people losing their jobs,” he says.
He also says house prices dropping (as CMHC predicts they will in the second half of the year) would have a “major impact” on the housing market.
The biggest thing to watch for in Halifax, however, will be how quickly Nova Scotia’s borders reopen.
Migration into the province has been a major driver of new home construction (and a spike in prices) in the city for the last few years.
Ndoro says if that migration slows significantly because of Covid-19 the major population growth engine in the city stops. And fewer people means less demand for houses and a weakening housing market.
“One of the biggest drivers of the housing market in Atlantic Canada is international immigrants. It has a huge impact on the rental market and then the spillover as well in the housing market,” Ndoro says.