The growing uncertainty facing Canada’s housing market was the focus of the 6th Annual Real Estate Canada Forum held on Oct. 6 in Toronto. The closed-door forum brought together real estate investors amid concerns over continued interest rate hikes and the resulting market cool-down.
A key takeaway was that Canada’s housing shortage and affordability crisis—most pronounced in Ontario and British Columbia—is now more dire than what the U.S. housing market is facing.
Housing affordability continues to worsen
The Canada Mortgage and Housing Corp. estimates that 5.8 million more homes will need to be built by 2030 to meet growing demand for affordable housing. Given the continued decline of housing starts through the third quarter of 2022, CMHC projects only 2.3 million homes will be built by 2030 at this pace.
Of note, Canada has one of the most unaffordable housing markets in relation to income among the G-10 countries; however, home ownership in key metro areas remains above 65%—a stark contrast to the less than 50% home ownership in major U.S. cities.
Meanwhile, population growth continues across the country, driven mainly by increased immigration to address the labor shortage and Canada’s popularity in the international student market. This influx has put added pressure on the housing shortage and kept rental rates at their highest levels in the metro markets with no anticipated decline.
Office vacancies remain high
“Flight to quality” was the day’s slogan for investors in the commercial office space sector. While the COVID-spurred suburban migration has reversed with more people moving back into cities, this trend has not yet translated into a rebound for office occupancy rates. There is demand for office space in the key metro markets, but prospective tenants are seeking primarily Class A office space and amenities.
