Canada's Construction Crisis

👷 Housing Construction Increases Unevenly Across Canada

• Housing starts in Canada rose 8% in October to 240,761 units, up from 223,391 units in September.

• The Prairie provinces saw a 27% increase in year-to-date housing starts, while the Atlantic provinces experienced a 31% rise.

• Ontario and British Columbia saw an 18% and 11% decline in the year-to-date housing starts.

• Montreal saw a 12% rise in year-to-date housing starts, reflecting recovery from low construction levels in 2023.

Why This Matters: Canada’s housing market continues to face an affordability crisis, and current construction levels remain insufficient to meet demand. This gap between supply and demand has significant implications for buyers, renters, and investors, as it could lead to sustained price increases and more considerable pressure on the rental market.

📉 Ontario Ranks Lowest in Housing Starts

• Ontario consistently ranks in the bottom half of provinces for homebuilding per capita over the last six years.

• Ontario holds 13 of the bottom 20 spots for per-capita homebuilding, including Brampton, Windsor, Burlington, and Peterborough.

• Toronto is the only Ontario city in the top 20 for per-capita apartment unit starts, ranking 15th behind Burnaby, Moncton, and Gatineau.

• Over the last four years, over 100,000 more people have left Ontario for other provinces than moved in, contributing to a "brain drain."

Why This Matters: Persistent undersupply of housing may drive property values higher in Ontario over time. Rental properties remain attractive as rents rise and vacancy rates remain low. Population outflow to other provinces suggests potential opportunities in emerging markets outside Ontario.

📈 GTA Home Sales Boom in November While Inventory Drops

• October home sales rose 44.4% year-over-year, marking a significant market shift.

• November sales continue to trend upward, which is atypical for this time of year.

• Active inventory is declining, reducing months of inventory (MOI) across the board.

• In the last 7 days, MOI for houses has dropped by 3%, while condos saw an 8% decrease.

Why This Matters: Tightening months of inventory signals a potential shift to a seller's market, particularly in condos. Market momentum will likely carry into 2024, creating potential for short-term gains for investors.

😰 Mortgage Arrears Will Surge in Toronto and Vancouver

• CMHC warns that mortgage arrears in Toronto and Vancouver are expected to rise to levels last seen in 2012 and 2015 within 6-12 months

• Over 1.05 million mortgage renewals are scheduled in 2025, with homeowners likely facing significantly higher interest rates.

• Canada’s unemployment rate has risen to 6.5%, up one percentage point over the past year, contributing to financial strain.

Why This Matters: Rising arrears in Toronto and Vancouver signal increased financial stress, potentially leading to distressed sales or investment opportunities.

🏢 Canada’s Public Land Could House 1 Million People

• A University of British Columbia study shows urban public land in six cities could house up to one million people.
  Toronto's public lands could accommodate 587,000 people, Ottawa 200,000, Calgary 89,000, Hamilton 114,000, and Gatineau 55,000.

• Canada needs 3.5 million additional homes to alleviate its housing crisis.

• Ottawa has made 951 acres of federally owned land available for development, but no deals have been finalized yet.

Why it Matters: Leveraging government-owned land near amenities and transit could reduce construction costs, making housing more affordable. For real estate investors, these developments signal opportunities to invest in areas with increasing supply and demand dynamics, potentially driving long-term growth.

🤔 WTF of The Week

Recent assignment prices reflect a property's true market value, leaving this investor needing additional funds to avoid losing their deposit.

Back in 2017, resale units near King & John were priced at $940/sqft, but Nobu pre-construction units were sold at $1,800/sqft—a clear case of developers pricing in investors’ expected profits for themselves.

Prices would need to drop by 70% for these numbers to make sense.

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