Record construction not enough to meet Canadian real estate demand: RBC

The construction of single-family houses takes less time than the construction of condominiums (REUTERS)

The number of homes under construction in Canada is at an all-time high, but it is still not enough to meet the seemingly endless demand for real estate in the country.

Low mortgage rates, increased savings, and changing needs as more people work from home drove buyers headlong into the housing market during the pandemic. Permit approvers and builders got to work and construction accelerated at a breakneck pace to keep up.

“Their response was dramatic. In the past 12 months, home builders across the country have laid the foundations (which define a start of construction) for the highest number of housing units (260,500) than ever since 1977,” said RBC economist Robert Hogue in a report .

“This is an increase of 26% or 53,600 units over the 2015-2019 average (206,900 units).”

Hogue says there are nearly 320,000 residential units under construction, the highest ever and up 12 percent since the end of 2019. About three-quarters of these are apartments, mostly condominiums, but also rental apartments that are taking longer to build. A huge surge in single family home prices and sales during the pandemic suggests that home builders may not be building the right type of homes.

“While it is unclear how permanent these changes will be, the possibility exists that the size, configuration, and location of the units of recently launched high-rise projects will fall out of favor,” said Hogue.

“Apartments (both condominiums and purpose leases) not only accounted for the majority (55%) of housing starts in the past 12 months, but also showed the largest increase (39%) from the 2015-2019 average.”

Not enough apartments

Another part of the problem is that it can take a long time to complete. Hogue says it can take anywhere from six months to several years to complete, depending on the type of property. Since apartments make up a larger proportion, the average construction length has more than doubled in the last two decades. Supply chain problems during the pandemic were also addressed in a timely manner.

The story goes on

Construction is also not keeping pace with population growth. Hogue says the 215,000 new units in the past 12 months lag behind the average annual increase of 220,000 Canadian households in the four years leading up to the pandemic.

The pandemic shift towards living in small towns meant that these areas saw the greatest increases in construction activity, followed by medium-sized areas and large cities. But the construction has changed depending on the city.

See also: The latest real estate news on property prices, mortgage rates, markets, luxury homes and more at Yahoo Finance Canada.

“Housing starts in the Toronto area have barely increased over the past 12 months from the 2015-2019 average, increasing only 1.4%, or 500 units,” said Hogue.

“The ramp-up in the new building was somewhat stronger in Edmonton (plus 4.1%), Calgary (plus 7.2%) and Vancouver (plus 10.3%), but still well below the national average (26%).”

Hogue says that homes that can be built more quickly, such as low and medium-sized buildings, as well as medium-density living space in urban centers that are scarce, should be a priority.

“This should be done in conjunction with a strong focus on streamlining regulatory and project approval processes and addressing skills shortages and other constraints that limit production capacity.”

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

Download the Yahoo Finance app, available for Apple and Android.

source https://www.bisayanews.com/2021/09/25/record-construction-not-enough-to-meet-canadian-real-estate-demand-rbc/