A surge in apartment projects, particularly in Toronto, Vancouver and Calgary, prevented a decline in Canadian new-home construction in 2023, reports the Canada Mortgage and Housing Corporation.

But the large amount of construction starts will not improve housing affordability, and apartment developers could struggle to match the new-supply level in 2024, warns the federal housing agency’s deputy chief economist for CMHC.

“The concern now shifts to whether construction of apartments will hold at these high levels in 2024,” said Aled ab Iorwerth in a news release accompanying CMHC’s latest Housing Supply Report (HSR),” which revealed the findings.

“Clearly the demand for housing exists, particularly in rental, but financing costs could become too heavy for homebuilders to begin construction on large multi-family projects at the same pace seen in 2023.”

Constructing timelines for all dwelling types exceeded historical averages.

The CMHC’s concern comes as the Bank of Canada is widely expected to start cutting its key overnight interest rate in 2024. Investors are planning to bring more capital off the sidelines but development costs, including mortgage expenses, remain a major concern, Altus Group has reported.

Apartment construction, including purpose-built rental suites and condominium units, reached record levels in Toronto, Vancouver, Calgary and Ottawa in 2023. But Montreal fell to an eight-year low.

“Purpose-built rental units accounted for a greater proportion of apartment starts in 2023, compared to historical averages, reflecting an unprecedented level of rental demand,” stated CMHC. “Record condominium apartment starts reflected robust presale activity and favourable borrowing rates secured before 2023.”

Overall, apartment construction surged 7% in 2023; however, single-detached home starts declined 20%.

The CMHC report covers Canada’s six largest cities, including suburbs.