RE/MAX’s most recent housing inventory report brought some concerning results: the study shows that average inventory levels in the majority of the major Canadian real estate markets have fallen to their lowest levels in 10 years. Most markets have double-digit declines, including the Calgary market with a 26% below-average inventory level in comparison with the 2003 to 2012 period.
What can buyers and tenants expect from the current reality of the Canadian real estate market? Let’s take a look at the factors that come into play in the current housing inventory shortage.
Canada’s Population is Growing, but Housing Isn’t Keeping Up
If we contextualise the housing inventory shortfall with the continued population growth that Canada has experienced due to immigration (+5.2% since 2016), and the country’s commitment to welcome more than one million new Canadians by 2024, we can expect a major decline in housing inventory.
We can also foresee a major housing crisis due to the fact that the construction of new homes is not keeping up with current demand, and all signs indicate that it will not be able to keep up to cover the expected housing demand over time.
According to a report from the Canada Mortgage and Housing Corporation released last June, 3.5 million affordable new homes are needed by 2030; however, only an average of 200,000 to 300,000 new homes are built per year.
Since 2020, many affordable residential developments have been cancelled or suspended indefinitely, and current market conditions, including higher inflation, rising interest rates, government charges, building-material supply chain and labour shortages are worsening the situation in the housing development sector.
The Rental Market is Set to Be Under More Pressure
Despite the real estate market showing signs of a correction since early spring, affordability is still out of reach for many in the current economic conditions. The immediate consequence of the shortage of affordable housing is that buyers left out of the market are pushed into the rental market, which is already experiencing rising prices and low availability, with lists of applicants waiting for a vacant unit being the new norm in many major cities.
The Calgary Case
Although Calgary is no exception to the problem of housing affordability and rising rents, market conditions are still more favorable for buyers and renters than in other big cities. In-migration of people from Ontario and BC who are choosing Calgary as a more affordable option is bound to increase competition in the market. Already, rental listings of all types of homes are shrinking month-to-month.
In terms of future housing supply, Calgary has the advantage that adding more affordable housing in desirable communities will be easier than in other major cities like Vancouver or Toronto, that are already constrained in space.
Another advantage the city has is the flexibility to expand the residential development for other types of housing: low-rise rentals, connected row and townhouses, duplexes, and cottage clusters. These are types of “missing middle” housing that could ease the pressure on the market, and could give a chance to many people that currently are out of the market and newcomers to purchase or rent a home suitable for their needs and budget.
A Housing Crisis is Possible but Not Certain
While nobody can be 100% certain about the future of housing in Canada, the future’s not set in stone and there is still room to turn the course of events. The most important thing that buyers, sellers and renters can do is to stay informed.
At Amhurst, we’re constantly monitoring the real estate market to provide a comprehensive picture to our clients. If you want to stay in the loop with everything that is happening in Calgary real estate, subscribe to our newsletter.
