The supply shortage pushing Canadian real estate buyers to the limit doesn’t exist. It’s an unexpected take from the Union of British Columbia Municipalities (UBCM). The Government report, building on SFU City Program Director Andy Yan’s research, shows BC’s housing supply kept pace with its population. This follows a BMO Capital Markets report showing Ontario’s housing supply is growing faster than its population as well. Data for the two most expensive provinces reveals the supply shortage is overstated. The perception of a supply shortage is fueling price growth more than an actual lack of supply.
BC Residential Real Estate Supply Has Kept Up With Population
BC real estate is in short supply, but not due to a lack of housing built — it’s how housing is used. The UBCM report shows BC builds homes at a pace consistent with population growth. Between 2016 and 2021, the province’s population grew 352,824 (7.6%), and dwellings grew 148,277 (7.2%) over the same period. The analysis concludes with average household size, this adequately meets demand.
“Housing supply is increasing dramatically, in step with a growing population,” reads the report. It isn’t a surprise since the report highlights that more housing was built in BC over the past three years than in any three-year period in the past decade.
Sure, but maybe there’s a deficit? A Municipal breakdown reveals the most expensive cities saw new housing keep pace. In some regions the growth of housing even outpaced the population.
BC’s Most Expensive Markets Are Seeing Housing Growth Outpace Population
The change in population and private dwellings from 2016 to 2021 for BC’s most expensive real estate markets and its provincial average.
Source: Stat Can; UBCM; Andy Yan; Better Dwelling.
“Furthermore, analysis of 2001-2016 data finds little evidence to support claims that the supply of housing units in expensive markets has been inadequate to keep up with growth in household numbers,” they wrote.
This isn’t to say that cities don’t need to build more, but a lack of supply isn’t the primary price factor. “[the data] … certainly undercuts any claims that there is a gross misalignment between the growth in new homes and the growth in BC’s population.”
Ontario Residential Real Estate Outpaced Population Growth
Earlier this year, BMO made similar observations for Ontario. In a research note to investors, they explain the population grew 5.8% between 2016 and 2021. The massive population growth was met with 6.2% growth of the province’s housing. Ontario’s fast-growing population found something faster — the pace of homes built in the province.
BMO explains Canada has seen the most housing delivered since the 1970s. That’s with 2020-era material and labor issues, which slowed down the pace of delivery. A record number of homes are also under construction as well, the bank points out. This doesn’t just mean supply is adequate, but even future supply will be adequately met at this pace. Macro research firms are even telling institutions that supply will outpace population growth.
“We acknowledge longer-term issues on the supply side, but the volume is much too high on that front. Meanwhile, speculative demand psychology keeps building,” said the bank’s senior economist Robert Kavcic.
A popular narrative that Canada has the fewest number of homes per capita in the G7 is being repeated. The bank takes issue with this statement, since it’s a misleading measure. Due to Canada’s demographic composition being younger, fewer homes are needed per capita.
“We really need to look at 18+ population, especially when making cross-country comparisons… Canada is young versus the G7, so our housing stock per person should be lower,” said Kavcic.
Anyone who’s looked at the MLS for listings might be at odds with these findings. Existing homes listed for sales are scarce in both provinces these days. Experts attribute this to excess property not being disposed of due to rapid price appreciation. One notable mortgage expert explained they aren’t seeing people sell, but leveraging for additional homes.
It would be silly to sell while home prices are rising at the pace of their annual income every two months. As interest rates rise, falling credit stimulus is expected to slow demand. At least one bank expects this to lead to almost no price growth, while another says this should lead to more listings.