Canada needs to ramp up home building by 50 per cent just to keep pace with immigration, according to a new report.
The country is on track to break ground on about 210,000 housing units this year, according to Desjardins Securities. But the Desjardins report says about 100,000 additional housing starts are needed this year and next, as Canada gets ready to admit a record number of immigrants.
Many economists and real estate industry experts believe there is a severe shortage of housing in the country – and it will only get worse. Canada has increased immigration levels to make up for the shortfall during the first year of the pandemic and to help fill jobs in construction, health care and other areas.
With the federal government planning to admit 1.45 million new permanent residents over the next three years, the report says, housing starts must become a priority, in part because of the time it takes to complete a housing unit.
“We have to dig out of a hole and move higher ultimately,” said Randall Bartlett, Desjardins’ senior director of Canadian economics.
A large share of new immigrants end up in Ontario and B.C., two provinces where home prices have historically risen faster than in the rest of the country.
Although the typical home price across Canada dropped 13 per cent from the peak last February by December, the average price in the most popular destinations – Toronto and Vancouver – still tops $1-million.
“If these newcomers to Canada continue the recent trend of moving to Ontario and British Columbia, affordability there and nationally will erode further,” says the report, authored by Mr. Bartlett and Marc Desormeaux, the bank’s principal economist.
At the same time, rental rates have been quickly increasing as many would-be homebuyers have had to continue renting owing to higher mortgage rates.
Desjardins’s call for more home construction echoes statements from the national housing agency, Canada Mortgage and Housing Corp., which has repeatedly said the country needs to increase its supply of homes.
There were 261,849 housing starts last year, according to government data. That is expected to decrease this year because developers postponed product launches when the costs of borrowing and construction soared.