Canada quietly passed a new milestone in March, and industry experts haven’t decided what to make of it. According to the latest numbers from the Canada Mortgage and Housing Corporation (CMHC), March saw a high for new home construction. This new construction high is in response to the population boom the country saw last year, but can population keep up with the rapid pace of building?
Housing Starts Highest Since 2007
Construction of new housing rose to a multi year high in March. The CMHC counted 235,674 starts in March, a 28% increase from the same time last year. This is 52% above the 27 year average for the month, so it’s a lot of building.
It’s been almost a decade since Canada has seen numbers this high. September 2007 was the most recent month to see numbers in this quantity, when it saw 252,846 units started. Before that we need to go back to January 1990 to see a higher number, when 237,453 starts were documented.
Canada Estimated Population Change
Source: Statistics Canada.
Population Growth Was The Highest Since 1989
All of this housing must mean a booming population, right? Kind of. 2016 saw the population estimate jump by 485,034 to 36.28 million people. That’s a 29% increase over the average annual population growth. The last time we added this many people was in 1989, when the population jumped 485,034 people. It’s worth noting that both population booms were followed with record construction.
Residential Construction Starts In Canada
Source: CMHC.
What You Should Look Out For
A construction boom following a population boom makes absolute sense on paper. However, developers often develop based on the assumption that the population will continue to grow at a breakneck speed. This is often not the case, and over construction in 1990 resulted in declining prices shortly after, especially in urban centers like Toronto that saw rapidly increasing prices during the boom.
This could be a “new normal,” but sustaining population growth at this level is really tough. Since Canada is largely dependent on immigration for growth, the country would need to import roughly the population of Halifax this year. While that sounds cute and friendly on paper, it brings a different set of problems with it.
Like this post? Like us on Facebook for the next one in your feed.
I am sorry Glynis, but in Toronto alone, we have over 100K empty units… The demand you are referring to is simply demand for money laundering assets, non-taxed income from AirB&B, and the overleverage investment property solution, which is an artificial demand with Canadians being at 160% plus in debts. The moment BoC starts raising the interest rate and foreign investors start pulling the money out of Canada, we will have extremely high supply. Note, the average 450K population grow is a number for the entire country and includes babies as well refugees from the US; the latter will go with a subsidized housing. Youth unemployment is at 14% and those people will not leave their parents houses. In addition, currently we have young employed professionals moving back to their parents houses due to the rent/purchase price hike (some of them team up as roommates to handle the situation). BoC just announced today the hike of the interest rate. Everybody is talking about Canadian real estate bubble and its burst, except the non-regulated real estate industry. Those are facts. We cannot be ignorant about it. I have been told by my colleagues that some real estate agents stage bidding to hike the price. Home Capital Group (lender) has been served recently with an enforcement notice due to mortgage brokers entering higher income of the mortgage applicant than the reality. I can go on and on… I am a renter with a notice of 30% rent increase, so I started looking for my new place., and guess what… I found cheaper rent and in the most luxurious building in Toronto,.. at the end of the day I am soooo happy cos it forces me to pay more, but I will have the most luxurious condo with an excellent gym (I am cancelling my gym membership now which will add to my rent budget). Most of the local businesses will have zero dollars from me cos most of my salary goes to my rent. I have also re-budgeted my food spending; going on fruit/veggies diet… good for my pocket and my health. No more wine once a week, no more clothes or shoes bought at the Bay. I will purchase them all online from other countries. Sorry, but this is the way that Canada goes those days. My vacation will be a cottage of my friend and my fabulous new place with three swimming pools and huge deck :)… included in my rent…
Great assessment, Dana. You’ve clearly dug deeper into the details rather than the glossy headlines that Glynis is relying on for her conclusions.
By the way, which condo are you located in? Three pools? Wow!
I think Glynis is trying to say “It’s different this time”. It never is…
Where does one get the “over 100K empty units in Toronto” statistic from? I have heard 65K elsewhere and that even seems high, given that we have such a sparse rental market, too. Units under construction are certainly empty, but with rentals also in demand, I find it hard that a condo/house owner would just sit on an empty place paying mortgage, maintenance fees and property taxes with no supplemental income.
I do realize that some foreign buyers would prefer to leave an investment unit empty to avoid the headache of being a landlord and also claiming rental income in Canada, but 65K or even 100K empty properties doing this seems unlikely.
The expected implementation of foreign real estate ownership taxation and/or a vacancy tax would cause some investors to reconsider their position and may force such empty units to be filled. Maybe some will sell properties off to take their profits elsewhere, thus helping increase inventory. There IS a need for more available housing at this time, so perhaps encouraging these foreign investors to occupy the units with some kind of preferred tax treatment is the way to go instead of penalizing them for investing in Canada in the first place.
Our reputation for multiculturalism, safety and overall standing as a city on the international scene is something many locals have a hard time believing or grasping. It has been long overdue for Torontonians to embrace this and realize that we are a great place to live, which is why we have been drawing investment dollars in our city, because it is still considered very affordable relative to other cities in the world which are not as great of a city to live in.