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 demand for single-detached family homes, according to a report 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,” said Adrienne Warren, senior economist, Scotia Economics. “Construction of single-detached homes, in contrast, fell 7% 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.”

According to the report, multiple-unit housing developments are becoming an increasingly dominant fixture of Canada’s residential construction landscape. Multi-unit projects accounted for 47% of all housing starts in 2005, compared with just 37% 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,” added Warren. A similar shift in favour of multi-unit construction has generally emerged at the later stages of prior housing cycles in Canada.

While traditional single-detached homes remain the overwhelming choice for the majority of Canadian homeowners, a gradual shift toward higher-density forms of housing has been under way for several decades. Multi-unit housing accounted for almost 20% of owner-occupied dwellings in 2001, up from 16% in 1991 and just 13% 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 homeownership 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.

“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. “Condominium purchases are highest among Canadians aged 20-29 and those 55 and over, with the former group looking for an affordable entry point and seniors and empty nesters looking for lower maintenance housing options.”