Canada Needs to Focus On Real Estate Demand
Canada hasn’t seen so many housing units delivered in such a long time. Robert Kavcic, a senior economist at BMO, wrote to clients this morning about July’s new data on housing completions. Canada hasn’t built this many housing units in decades. Although there are still some supply-side concerns, they are not as serious as they were a few years back. He suggests that more attention be given to the demand-side aspect of the issue.
Canada hasn’t built this much housing in a very long time
Canadian housing completions are much higher than normal these days. In the last 6 months, urban new housing completions have surpassed 180,000 units annually. This was the largest total since the mid-1970s, according to BMO.
This number is significantly increased when you include smaller, urban areas. Canada has averaged well over 200,000 units per year over this period. Kavcic stated that there is always supply.
They note that this is consistent with the long-term average, even after adjusting for population. There is no shortage of supply. However, supply is growing at the fastest rate in years. He said that the supply was at or near the top of the last two years.
Canada has the lowest number of homes per capita in the G7. But it’s not a significant point.
One economist from the Big Six (the red one) was tapped to take on the G7 per-capita argument. The idea that Canada has the lowest number of homes per capita has been a topic of debate. Although it doesn’t make sense, some believe that every country should have the same number.
He wrote, “There is a common argument that Canada’s housing stock per capita is the lowest in G7 countries. So we don’t have enough.”
This might be possible if Canada were similar to the European countries it is being compared with. The problem is that every country has its own demographic profile and housing preferences. Kavcic adds that a younger population, with more children per household (like Canada), would probably require a lower per capita stock.
Canada has a lot of supply, but Canada needs to cool down the demand
The supply-side is now on the right track with the highest number of housing units in recent years. But, nobody is talking about the demand-side problems created. Through programs like QE, Canada has stimulated demand beyond what is natural. This causes demand to be pulled forward into the current window. This creates a chaotic flow of buyers and leads to excess demand.
Some issues, such as down payment assistance, can compound in this area. These buyer stimuli programs are common in countries that have low market prices. They provide incentives for people who won’t buy a home. Kavcic concludes, “There are certain supply-side problems. But the demand side housing in Canada must be discussed.”
Canada introduced demand stimulation, which was accompanied by record home sales. This created more demand and increased buying. It’s not a supply problem, but it is too rich to call it that.
Sandi Branker is a Real Estate agent and a Think Ely Real Estate Team member at Zolo Ottawa. She can be reached at (613) 408–7935 or by email at firstname.lastname@example.org. Facebook| Google My Business |