Canada has fallen behind other developed nations in housing units per person, with estimates being 1.8 million homes short of the G7 average..The shortage was compounded when COVID-19 hit and the Bank of Canada lowered its prime rate to .25% to stimulate the economy..It worked, especially in the housing sector..Canadians stood in line for the lowest mortgages rates in years, buying up homes as fast as they were listed or completed by builders..Good for the economy, but no longer good for home buyers who have been sidelined because of average prices reaching historic highs, as demand has outstripped supply..The Singh/Trudeau government’s April budget focused on the shortage, because it could become an even bigger issue in the next election. The government proposed to spend $4 billion dollars on a construction accelerator program that would bonus municipalities for every new home started in their communities or up-front funding for investments in housing and delivery processes that will speed up development..The bonuses would be managed by the Canada Mortgage and Housing Corporation (CMHC)..In addition, the Bank of Canada has taken an aggressive position with its prime rate, raising it to 1% and promising more increases in the coming year..The federal money (proposed, not promised) may not be needed, which is good..April’s sales numbers show the Bank of Canada’s actions might be working, especially in the two markets that have heads spinning..The Toronto Region Real Estate Board reports a 41.2% drop in sales in the Greater Toronto Area, year-over-year in April, and a 22% drop from March..The Real Estate Board of Greater Vancouver reports sales were down 34.1% from April 2021, and down 25.6% from March 2022..In Calgary, April sales were up from April 2021, but down from March (the highest month ever for sales in Calgary)..The Greater Edmonton Area saw sales increase 2% from April 2021, but down 10.9% from March..The key numbers are the March-to-April declines, although they should not be considered a trend yet..In conjunction with the April numbers, CMHC released a new Housing Supply Report..“The Housing Supply report provides regular insights on new housing supply in Canada’s major cities and urban areas. These insights can help us understand the supply responsiveness that we know contributes to price escalation and housing affordability challenges,” say the report's authors, senior specialists, market insights, Eric Bond and Francis Cortellino..The report focuses on new home starts in Canada’s six major cities, all of which saw starts increase, compared to 2020 figures..Says the report:.• The strongest expansion for starts was in Calgary — up 63% from 2020, driven, by a 58% increase in single-family home starts and a 91% increase in apartments. Some of this increase is attributable to slower construction during the pandemic in 2020..• Starts in the Edmonton CMA increased 9% in 2021. The initial impact of the COVID-19 pandemic on the new home market was short-lived. The increase in housing starts in 2021 represents the second consecutive year of gains..• Vancouver was the only city to see single-family-starts decline of 2.3%, with high land prices making development uneconomical. Overall, housing starts in Vancouver increased due to higher apartment construction..• Montreal saw a large increase in apartment starts, as prices (and rents) and demand all accelerated..• In absolute terms, Toronto started the most homes in 2021, recording a 9% increase over 2020, fueled by the apartment and single-family sectors..• In a market where starts were already on the increase, starts in the Ottawa area reached their highest level in nearly 50 years, a 3% increase over 2020..Total starts in the six cities were 138,038 homes, of which 91,072 were apartments and 14,572 were townhomes..Sounds impressive, but new home starts do not contribute to supply until the homes are finished. Single-family homes and semi-detached homes are taking seven to eight months to finish and 90% or more of those have already been sold, so they add very little to the pool..Typically, banks do not give builders the go ahead to start building until 50% to 75% of units in an apartment or townhome project are sold, so none of the sold units add to supply, unless they were purchased to be immediately resold or rented when complete..Obviously, new home starts alone will not solve the supply shortage, until municipal development systems change..“The only long-term way to build more housing, to improve affordability, is to make it easier to build,” says Andrey Pavlov of Simon Fraser University..“There are certainly enough people interested in building housing right now. The bottleneck is not money for housing, it’s waiting for city approval and inspection and confusing provincial building codes.”
