A long-standing issue in Canada’s housing market only appears to be getting worse
The time has come to “ring the alarm bell” on Canada’s lack of housing supply, with no end in sight to the inventory shortage that’s been a constant theme in the market in recent years.
That’s the view of Christopher Alexander (pictured), president of real estate giant RE/MAX Canada, who told Canadian Mortgage Professional that the company’s recently released 2022 Housing Inventory Report aimed to shine a light on the chronic supply issues facing many urban centres across the country.
That report found that inventory levels have dipped below the 10-year average in seven major Canadian markets in 2022, with double-digit declines recorded in Ottawa, Halifax-Dartmouth, Montreal, Calgary, Winnipeg, and Greater Vancouver.
While the Greater Toronto Area (GTA) saw a much less dramatic figure on housing shortage, with supply around 7% below the 10-year average, only one of the markets studied – Hamilton-Burlington – registered an increase over that average. That area’s housing inventory levels were up 3.2% compared with the 10-year average in 2022.
The “deep-rooted” issue requires urgent action from all levels of government to help bring more inventory to the market, according to Alexander, particularly with the number of new homes being constructed falling well below the levels required to welcome record numbers of new Canadians in the coming years.
Significant growth in the number of single-person households also highlights the need to act swiftly, Alexander said, with the Vancouver metropolitan area seeing a 30% increase in those types of household in the last 15 years.
“You’re not [just] having people buying homes when they get married – they’re doing it a lot sooner,” he said. “You’ve got more people buying homes that aren’t in a couple, so that’s exacerbating the challenge.
“Twenty-nine per cent [29%] of new Canadians are going to Toronto and about 10% are going to Vancouver, and another 10-12% are going to Montreal. So our big cities [face] an immense pressure to have inventory, and we’re short.”
Sky-high demand and lack of supply have helped to drive up the price of homes in the country’s hottest markets in recent years, with Alexander describing Toronto and Vancouver as the two areas of most concern because those two urban centres have seen the most dramatic price increases during that time.
Montreal, Calgary, and Halifax aren’t far behind; in fact, the latter had just 1,100 total listings for sale in July for a population of just under 500,000, Alexander said.
No one-size-fits-all solution can be applied to Canada’s housing inventory problem, according to Alexander, particularly with each city home to unique factors that aren’t the same across the board.
Still, the process could be streamlined and accelerated by reducing bureaucracy and other barriers to construction, he said.
“There are different factors for different cities, but I think what is critical is we’ve got to find a way to incentivize more developments,” he said. “Get rid of as much red tape as we possibly can while still being responsible and find a way to speed up the process for approvals.
“If you think of the City of Toronto, it takes years to get a project approved and then more time on top of that to build it because there’s just so much bureaucracy and hoops you’ve got to jump through to get anything going. And then on top of that, you’ve got a labour shortage. So it’s a really deep issue.”
Canada Mortgage and Housing Corporation (CMHC) has indicated that the country needs 5.8 million new homes to be built by 2030 in order to bring house prices back to more affordable levels – a target that Alexander said the country is extremely unlikely to meet at its current pace of construction.
While interest rate increases have caused house prices to level off or decline across many markets, the fact that rates remain relatively low by historical standards will have big repercussions for the overall trajectory of home prices in the coming years, according to Alexander.
“I think it’s important to point out that ‘yes’, interest rates are rising. But we’re probably going to land at 5.25% to 5.5%,” he said. “That is an extremely low interest rate when your amortization periods are between 25 and 30 years. And when you have such an inventory shortage, prices really only have one way to go with rates being that low.”