Our population is growing at record highs but where is all the housing?

According to Statistics Canada, the Canadian population achieved its highest annual rate of growth since 1957 last year, growing by a whopping 2.7% to reach a population of just less than 40 million - 39,566,248 to be exact.

The significance of this can’t be understated as it marked the first time in history where the population of Canada grew by more than 1 million people in a single year.

The primary driving force behind this which accounted for 95.9% of the growth was inbound migration from abroad. This, in large part, is a result of the Government of Canada’s initiative to address labour shortages across the market alongside challenges of an aging population, and unemployment rates that were near record lows, exacerbating the need for skilled workers.

This all makes sense but it starts to get really interesting when you look at the fuller impact this will continue to have across the housing market locally and Canada as a whole.

The concept is quite simple. The more people we have living here, the more housing we need. However, at the same time, the more housing we need, the more people we need to build that housing and so the cycle continues. But there’s another interesting dynamic here that makes the situation even more challenging. When there’s increased demand but a shortage of labour to build it, labour rates go up and things like housing get more expensive to build.

Said another way, if we have more people who want homes and not enough people to build them, housing prices will continue to go up. This combined with other major factors like inflation and persisting supply chain issues, that are top of mind for all of us these days, will continue to put upward pressure on the prices of new homes.

In fact, Statcan itself has identified this as a key concern in their report, stating:

"A rise in the number of permanent residents and temporary immigrants could also represent additional challenges for some regions of the country related to housing, infrastructure and transportation, and service delivery to the population."

Further adding to the story is what’s happening on the ground throughout Ontario and much of the nation. Following a year of record population growth, we find ourselves in an environment of increasing interest rates whereby buyers are being more selective than ever before when buying into new housing projects. Buyer demand remains but the buyers that are active are extremely selective and purchases are increasingly being concentrated in projects that drive the highest level of confidence. Quality of location and overall design remain extremely important but buyers are increasingly looking to builders with the strongest track record and projects that look most likely to achieve enough sales to begin construction and get built on time. We’re seeing this across our active projects like DUO at Station Park, Moda and The Jake, all of which are now under construction. What we’ve seen is that in an uncertain environment, buyers look for projects that can provide the most certainty and project’s that have the best chance of reaching construction go a long way in helping to provide that.

However, not all projects are experiencing the same success. The direct impact of fewer active buyers in the market and the concentration of these buyers into certain projects is that fewer projects will reach their construction threshold and continue to make it difficult to deliver sufficient supply to the marketplace.

So what’s our take? With the supply of new housing already challenged for a number of reasons, fewer projects reaching their construction threshold will only further constrain the delivery of new housing to the market. Increasing interest rates will continue to soften general market demand for pre-construction units across the market in the near term and even once interest rates start to come back down and increased levels of pre-construction buying activity begin to resurface, the timeline of projects not experiencing enough demand today will be significantly delayed and some could be potentially cancelled altogether. Combine this with record levels of population increases and the fact that new condominium projects take 24-36 months + to build and you have a recipe that we feel will only further exacerbate the supply/demand imbalance across the housing market and continue to drive up prices as immigration targets continue to increase.

So does real estate and in particular pre-construction represent a good buying opportunity today? Have questions about buying a pre-construction condo as an investment? Want to know which local projects are experiencing the highest demand? Reach out to us and we’ll connect you with a CC Expert that can help provide the expert advice you need to take advantage of opportunities in today’s market.

Have a great weekend everyone.

-CC