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London blew well past the $1-billion building mark for the seventh straight year in 2022, but rising interest rates took the shine off new housing construction.
City hall issued $1.6 billion in building permits in 2022 despite a steep drop in residential approvals, new figures show. That’s just $300,000 shy of 2021’s record of $1.63 billion, said Peter Kokkoros, city hall’s building director.
After 2021, “I expected to . . . sort of start trending down to normal numbers,” he said. “But last year we came really close . . . so I would say that that was a bit of a surprise for us.”
Before the ongoing streak, London had hit the $1-billion mark just once, in 2011.
Construction of institutional, commercial and industrial structures, such as post-secondary buildings and school additions, played a big part, Kokkoros said, after the city saw the number of residential units approved drop 35 per cent from 2021.
In total, city hall issued 4,176 permits, representing 2,598 new dwelling units.
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The biggest drop was in single-family homes. Only 612 such homes were approved in 2022, down 41 per cent from 1,047 in 2021.
Chalk that up to market uncertainty in the wake of the Bank of Canada’s decision to quickly hike interest rates to rein in inflation, said Jared Zaifman, head of the London Home Builders’ Association.
“It’s definitely scared a number of potential buyers of different types of residential properties, and people are looking for stability in the market before they make that purchase,” he said.
“Builders have seen that as well and they know that it’s hard to invest so much money into new home construction knowing that buyers are not there right now or not quite ready to pull the trigger.”
As interest rates have risen, the average resale price of London homes has dropped steadily to $585,000 in January, down 25 per cent from the same month in 2022. Some analysts predict further declines in coming months before stabilizing in the spring.
“I think that’s certainly why we’ve seen some of that slowdown, especially in comparison to how busy the previous years were,” Zaifman said. “And, certainly, that’s something we’ve seen not only in surrounding communities, but across the province as well.”
But 2022 was likely a blip, he added.
London’s commitment to meet a provincial target of building 47,000 units over the next 10 years is a big incentive that likely will see residential construction rebound, Zaifman said, a view shared by Kokkoros.
“We know that we’re going to have a lot of people continuing to come to London from other parts of the province and the country as we’re still a fairly affordable urban centre,” Zaifman said.
“And then, in addition, we know that immigration numbers are going to continue to keep going up, so we’re going to have an incredible demand on the residential side in London for many years to come.”
BY THE NUMBERS
Value of construction permits issued by city hall:
2022: $1.6 billion
2021: $1.63 billion
2020: $1.62 billion
2019: $1.37 billion
2018: $1.01 billion
2017: $1.1 billion
2016: $1.4 billion