Canadian homebuilding lagged in the past, but it now far exceeds population growth. CMHC data shows home completions started to outpace population growth last year. By the fourth quarter, there are now 18 homes completed for every person the population grows. Curiously, home prices have been soaring in growth.
Canadian Homebuilders Are Still Hammering Out Homes
Canadian real estate developers are busy delivering a massive amount of supply. There were 50,938 homes completed in Q4 2020, down 11.2% from the previous quarter. Despite the minor setback, new home completions are up by over 12.9% from the same quarter last year. Developers have been so busy, there are shortages from labor to lumber. It was the largest Q4 for completions since 2018. Before that, a Q4 hadn’t seen this many completions since 2008.
Population Growth Is Virtually Non-Existent In Canada
Population growth isn’t moving at nearly the same pace as construction. Canada’s population grew by 2,767 people in Q4 2020, down 89.1% from the previous quarter. That works out to a decline of 98.7% from the same quarter a year before. A lack of immigration is the primary reason this number fell so sharply.
Canada Completed 18 Homes Per Person Added To The Population
The trend of higher and higher completions per person just reached something rarely seen outside of an overhang. The ratio works out to 18.4 homes per person added to the population. It’s about 7x the quarter before, which was already a substantial 2 homes per person. For context, the average household is 2.9 people in Canada. In an optimistic scenario, annual completions are now larger than the average targeted household formation growth. It’s… a lot of supply, to say the least.
Canadian New Home Completions Per PersonThe number of new homes completed per person added to the population in Canada. Source: CMHC; Statistics Canada; Better Dwelling.
There’s a lot of things that come to mind when looking at these numbers, but home prices are at the forefront. We’re told home prices should slow as more supply is delivered, or even fall. Now we’re seeing deliveries of homes far exceed household formation, but price growth is accelerating.
It’s no wonder Canadian banks have started saying this has nothing to do with supply. It also makes a lot of sense now that the government said homes are affordable for foreign incomes, but not great for Canadians. Investors are likely waiting on significant inventory to sell when borders reopen.
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