Over the past decade, inventory levels in major Canadian real estate markets have declined, with active listings in July running below the 10-year average in almost all markets surveyed.
In areas such as Greater Vancouver, the Greater Toronto Area, and Hamilton-Burlington, supply was much more robust in the early 2000s, according to Christopher Alexander, President of RE/MAX Canada. The stability of the housing market contributed to healthy year-over-year sales and price appreciation during the Great Recession. As a result of population growth and household formation over the past decade, inventory levels have been depleted in large urban centers, resulting in mini-booms and busts. Unless we build more housing now during the current lull, we will continue to see the same scenario over and over.
Canada's real estate market remains dependent on inventory to maintain affordability and accessibility. CMHC reported recently that 3.5 million new homes are needed to address the affordability issue by 2030, but the country is building only 200,000 to 300,000 every year.
To achieve the desired level of affordability, Alexander says, we're likely to need more than CMHC's estimate. It is imperative to ramp up building efforts during this time of softer demand. Rent markets are being strained and homelessness is on the rise across the country as a result of the offshoot effect.
The number of active listings in July 2022 dropped almost seven percent from 2013-2022's average, but was still substantially lower than the average of 21,243 recorded between 2003 and 2012. It was $1,074,754 on average in July - up just over 33 percent from $806,755 in July 2019. The increased development charges have led to developers of purpose-built rentals and condos in Toronto shelved until 2023, at a time when higher inventory levels would help keep housing affordable. GTA home buyers are primarily motivated by life changes, whether they are related to a job, marriage, growing a family, retiring or divorcing. Several of them are first-time buyers. There have been some "green shoots" in the 416 area, with some open houses thriving and multiple offers occurring. This market differs in that buyers insert financing and home inspection conditions, and offers may be at or just $5,000 over the asking price. There is a high level of activity in the $900,000 to $1.5 million price range. Population in the GTA is up by 21 per cent between 2006 and 2021, adding more than one million people. The number of single-person households has also climbed, up 37 per cent since 2006, to 565,730. This trend will be particularly evident in the Toronto core as employers expect employees to return to the office. Even in hybrid situations, there has been real movement into the core.
A crisis is looming, but the outcome is not cast in stone. There is a short runway to reverse course before the impacts become very real for Canadian home buyers and renters. "Removing barriers and cutting red tape is necessary," says Ontario Housing Minister Jim Alexander.
SOURCE: RE/MAX CANADA