Erin Nicole Davis
Things look bleak on the housing supply front in Canada.
According to a new report from RE/MAX Canada, the housing stock could reach a crisis point in major Canadian centers without intervention.
Released this morning, the 2022 Housing Inventory Report highlights the decline in inventory levels in Canada’s major housing markets over the past decade. In July, active listings were below the 10-year average in nearly all surveyed markets, according to data from the Canadian Real Estate Association and information from the RE/MAX network. This is happening despite weaker overall real estate activity.
READ: Cooling housing market will trigger ‘mild recession’ in 2023
RE/MAX Canada’s Home Inventory Report looked at active July listings from 2013 to 2022 in eight Canadian centers – Greater Vancouver, Calgary, Winnipeg, Hamilton-Burlington, Greater Toronto Area (GTA), Ottawa, Montreal (CMA) and Halifax -Dartmouth – and found inventory levels were below the 10-year average in seven of those markets in 2022.
Double-digit declines are seen in Halifax-Dartmouth (65.5% below the 10-year average); Ottawa (down nearly 42%); Montreal (down 40% from the nine-year average); Calgary (operating 26% below average inventory levels); Winnipeg (down 23%) and Greater Vancouver (down 16%). The housing shortage was less pronounced in the GTA, where it fell by nearly 7% from the 10-year average. Hamilton-Burlington was the only market to buck the trend, posting a nominal 3.2% increase over the 10-year average, according to RE/MAX Canada.
Looking at the 10-year July average over the decade spanning 2003-2012, several markets have seen more active listings than in the most recent decade (2013-2022). These included the GTA (21,243 active listings vs. 16,458), Hamilton-Burlington (3,473 active listings vs. 2,304) and Greater Vancouver (14,352 active listings vs. 12,792).
“Supply was much more robust in the early 2000s in centers like Greater Vancouver, the Greater Toronto Area and Hamilton-Burlington,” according to Christopher Alexander, President, RE/MAX Canada. “This stability lent itself to healthy sales and year-over-year price appreciation and provided an anchor for the Canadian housing market during the Great Recession. Population growth and household formation have played a significant role in depleting stocks from coast to coast over the past decade, triggering chronic housing shortages in major urban centers that have resulted in mini – “boom” and “bust” cycles. If we don’t act now to build more homes in the current lull, this same scenario is expected to continue to surface again and again.
According to Statistics Canada, Canada experienced significant double-digit population growth between 2006 and 2021, and this is expected to increase further with Canada’s commitment to welcome 1.2 million immigrants to the country between 2021 and 2023. , combined with a growth in the number of new international students.
As the report points out, while the strategy aims to propel economic growth and reduce labor shortages – something that has become glaring lately – it is expected to intensify inventory shortages, especially in places like Vancouver and Toronto.
“Inventory remains key to the overall health of Canadian housing markets — affordable and accessible housing depends on supply,” the report reads. He points to a recent report by the Canada Mortgage and Housing Corporation (CMHC) which concluded that the country needs to build 3.5 million new homes by 2030 to solve the affordability problem, but the Canada averages only 200,000 to 300,000 new units per year. And that creates a ripple effect that leaves no element of the housing market untouched.
“The truth is that we probably need more than CMHC’s estimate to create the desired level of affordability,” says Alexander. “During this lower demand window, construction efforts should be stepped up, not scaled back. The side effect is straining rental markets and contributing to the steady rise in homelessness across the country.
Population growth is not the only variable exacerbating the housing supply challenge, says RE/MAX. New housing starts and purpose-built rentals continue to be insufficient. “During this time, a number of factors have emerged to create a perfect storm affecting available housing now and in the future, including inflation and rising interest rates, increased supply chain disruptions, and more. ‘global procurement, rising construction costs and a severe shortage of tradespeople, high land acquisition costs and slow municipal approval processes,’ reads the report.
It highlights higher rates of developer withdrawal in light of slowing near-term demand, combined with current economic and market realities
“Current market realities have upended the economic viability of many developments, resulting in the cancellation or indefinite suspension of new residential projects,” said Elton Ash, Executive Vice President, RE/MAX Canada. “The feasibility of many new or planned housing starts is now in question, but those that already had lower margins – affordable housing and starter homes – are at the top of the chopping block. If we are already experiencing an inventory crisis, what will be the consequences when demand rebounds? »
“The problem is that housing construction is a slow process, and experience tells us that the only thing slower might be government processes,” says Alexander. “There is a need to remove barriers and reduce red tape. A crisis is looming, but the outcome is not set in stone. There is a short track to reverse course before the impacts become very real for Canadian buyers and renters. »