As previously reported, Canadian home prices increased by 25 percent in May 2021, which has caused a plethora of bidding wars and limited supply.
BMO Senior Economist Robert Kavcic stated in a note to his clients that there is a massive differentiation of what is available to purchase and the number of Canadians looking to buy.
Kavcic states that this has been an “the core of our ‘housing problem’ is a major mismatch between the type of supply and demand, but it has been an entirely predictable outcome based on development policy and demographics.”
“This is the culmination of more than a decade of supply- and demand-side forces that, almost by design, predictably got us to where we are today. When Ontario introduced the Places to Grow Act in 2005, it set off down a long road toward single-detached home scarcity around Canada’s biggest market,” said Kavcic.
The numbers revealed that multi-unit starts totaled almost 30,000 units, there were just over 4,000 single-detached homes started.
Earlier this month, Core Development Group announced plans to purchase $1 billion worth of Canadian single-detached homes to rent and eventually profit. This move should help ease the issues but has received massive media backlash.
As multi-family home construction was increasing, Kavcic wrote that Millennials were aging into their prime homebuying and family-starting years. “The thing is, the idea that families want to live in dense, smaller and walkable urban spaces, is a bit of a fairy tale,” says Kavcic. “Young families want space, and they need it at a time before the baby boomers are ready to move on from those coveted properties, and after 15 years of crowding out single-detached development.”
“This imbalance should be cresting in the next few years, but the pandemic (pulling forward some activity), immigration targets north of 400k people per year, and record-low interest rates have magnified it,” Kavcic says.