They say you can have too much of a good thing, and that could be exactly what’s happening in some Canadian housing markets – those suddenly well-stocked will be seeing even more inventory in the coming months.
Data from the Canada Mortgage and Housing Corporation (CMHC) points to an increased number of new housing starts in September. While this is positive for overall supply and owner-occupiers, investors might be singing a different tune as inventory is among the highest levels we’ve seen in decades, and may lower home prices. This is especially true if existing homes continue down this path.
More new homes as existing homes climb to rare levels, nationwide
We saw new construction creep up nationally by 8 per cent, with units’ monthly seasonally adjusted annual rate (SAAR) reaching 270,500 last month. This was driven by multi-unit construction, which went up 10 per cent to a SAAR of 207,700 units monthly. As for single-family units, they were behind but still improved with a monthly SAAR increase of 3 per cent to 43,000 units.
More supply could boost dropping prices in major markets
While existing home sales have declined (huge population growth aside), there’s downward pressure thanks to record-high inventory levels.
September was aggressive for Toronto and Montreal, which grew their stock by 20 per cent and 98 per cent, respectively. Though Vancouver is 37 per cent higher than the same time in 2022, its prices dropped by 17 per cent in September.
Overall, compared to pre-pandemic periods, construction activity is significantly higher. But, home prices in these markets are lower thanks to resale inventories alone, as prices fell by 1.3 per cent in Toronto, 0.6 per cent in Montreal and 0.4 per cent in Vancouver.
Supply influx bad for investor-owners of new supply, good for end user-owners
With new housing starts across Canada rising again, they’re lower than their peak though higher than 2022 numbers. While many investors got into the market thanks to low rates, declining prices have weakened demand. As existing home inventories increase and new housing completes, the gap between current prices and what end users can pay should close.
More supply could boost dropping prices in major markets
Please send me more numbers
People are forgetting any home your buying will need renovation unless its been fully renovated are is a cookie cutter new built most new immigrants are first timers buy! Having said that, materials have increased in price since before pandemic and good luck finding skill labour shortages anytime soon. Everyone today seems to be an expert but at the end of the day, I don’t see prices dropping 50%/75% in value anytime soon, and if that happens then Canada will become a third world country not the safe haven Everyone believes it is! Lots of fear mongering out here!