Anyone and everyone – real estate agents in Canada included – would have had to have been living under a rock to not be aware of how there’s a very real housing shortage in major locales in Canada. There’s a whole host of factors that are playing into it, and it’s equally true to say that simply building more housing stock isn’t going to be a be-all, end-all solution.
The simple reality to observe in regard to that is that supply and demand principles are as wholly absolute and inflexible as they’ve ever been. The demand for housing in Canada FAR outstrips the supply, and so much so in fact that any type of realistic goal for new housing starts in the country still isn’t going to shift the supply / demand equation much if at all.
It’s entirely true that Canada needs immigrants in order to maintain it’s economy and the quality of life enjoyed by Canadians. Immigration has enriched this country greatly over hundreds of years, and it will continue to do so as industrious new Canadians work to make the whole of our country better in the same way those that came before them did.
Immigration on such a large scale as what’s been seen in Canada IS, however, contributing to housing shortages in a very real way. This affects nearly everyone, and for realtors it’s in fewer properties and fewer qualified buyers for higher home prices being the reality. Here at Real Estate Leads, our online real estate lead generation system in Canada is an excellent way for new realtors to get a leg up on their competitors in what is an increasingly VERY competitive space.
But back to topic – what is to be made of the effects of large-scale immigration on the housing ‘crisis’ that is particularly acute in Toronto and Vancouver.
More than Half a Million New Canadians for 2018
Canada’s population grew by 531,000 from August 2018 to July 2019, and Stats Canada says that’s the largest 12-month increase in the country’s history. This explosive growth is having an enormous impact on the housing market. Nearly 60% of the inflow made its way to Ontario and British Columbia, and not surprisingly it is work opportunities and quality of life that are leading these people to Vancouver and Toronto most notably.
Then when you add in shifting demographics and increasing rents and housing prices, the affordability crisis in Toronto and Vancouver becomes even more real and shortfalls with housing stock in BC and Ontario’s major metropolises could continue for the foreseeable future.
Rental Housing a Pressing Need
A recent economics report issued by the Royal Bank states that the Toronto census metropolitan area (CMA) will need approximately 9,100 more vacant units to reach a ‘healthy’ vacancy level of 3% or so. It then stated further that the Toronto CMA needs 22,000 new rental apartments and rented condominium apartments per year to satisfy what is the expected demand for housing in Toronto between 2019 and 2023.
The belief is that even if 70% of all new condos are rented, and 4,000 new purpose-built rental apartments are created for the GTA every year, that mark would still be missed. This really highlights the challenge between meeting what’s needed with what is realistically possible.
Failing to do that will mean that rents will continue to rise, and the expectation is that this is unavoidable even though purpose-built rental apartment construction is on the rise and 2021 is expected to be a big year for condo completions in the Greater Toronto Area.
Vancouver Harder to Forecast
The same report indicated that Vancouver needs 3,800 more available units to reach a 3% vacancy rate, along with 9,400 new rental apartments and rented condo apartments per year if forecasted demand between 2019 and 2023 is to be met.
Industry expectations are that 11,000 to 13,000 condo units and about 5,000 rental units are coming to the Vancouver CMA, if housing start data from the CHMC is seen as accurate.
What this could mean then is up to 14,000 new rented apartment units per year, far which would exceed the 9,400 units demanded and potentially taking up the entirety of the 3,800 units of undersupply that would be needed to raise the vacancy rate to the aimed 3%.
The city could then experience flat or declining rent levels. The workings of this are fairly straightforward too – As supply increases, rents decline and greater numbers of people can be housed in Vancouver. Despite this potential success, Vancouver needs much more rental supply and any degree of underbuilding will mean Vancouver rental rates would instead continue to rise.
Rental Availability & Affordability
Montreal is an interesting case study in contrast to those of Vancouver and Toronto. Montreal builds plenty of rental homes and that large supply makes rents more affordable. In Quebec, renting is a more normal lifestyle choice and it’s not stigmatized like the way it is more so in Vancouver and Toronto.
In the Atlantic provinces there really isn’t much of a crisis at all, and the economic slump in Alberta has kept rents from growing too large in Edmonton and Calgary. In Saskatchewan rents are actually declining.
One last consideration is that many baby boomers are now in their 60s and 70s and will soon have different housing wants and needs. Many will soon be downsizing and some will be choosing retirement homes. This is going to have a massive impact on the market, both for homes being sold and new homes that will be bought.
The current trend where so many older people are staying in their homes and not freeing up as many homes for younger people to buy is also playing a significant role in housing shortages in big and popular cities. Essentially it’s causing a jam at the bottom of the market, and what that does is promote high rent levels and high prices for condo apartments and rented condo apartments.
The purpose-built rental market is expected to continue to grow in Canada, as institutional capital and real estate investment trusts become more involved with the sector and aim to intensify existing properties.
How well this all works out, however, really remains to be seen and it has to be a cause for concern for those who foresee difficulty in finding housing that works for them in the cities where they have their lives and careers. It also promises to be very pivotal for those who’s livelihood is tied to a healthy and robust housing and real estate market.
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