With the increase in the number of immigrants settling in the country, we must “immediately” increase housing starts across the country by 50% in order to relieve the real estate market, warns Desjardins Group in a new analysis. However, quite the opposite is likely to happen.
Senior director of the Canadian economy Randall Bartlett and senior economist Marc Desormeaux calculate that 100,000 additional construction sites will be needed this year and in 2024. Their study is published as Canada prepares to welcome some 1.45 million permanent residents over the next three years. The slowdown in activity in the housing market following the pandemic effervescence could thus be short-lived if nothing is done.
“An increase in immigration will stimulate activity, underline MM. Bartlett and Desormeaux. However, if the past is indicative of the future, the supply response may be insufficient to prevent a rise in prices and an erosion of affordability. »
In 2021 and 2022, 217,000 and 271,000 homes were built respectively in Canada, according to Desjardins. Instead, 350,000 housing starts will be needed annually in the future.
In Quebec, between January and September 2022, net immigration posted a positive balance of 109,000 people.
The current record dates back to 2019 with a positive net migration of 95,000 people over 12 months.
A recent report by Canada Mortgage and Housing Corporation (CMHC) also reflected current pressures on the housing market. In Quebec, in particular, the federal agency recognized that there was a housing crisis in the rental market across the province. 95,000 rental units have been built in Quebec since 2020, but this was insufficient. Demand has grown faster than supply and there is no improvement in sight.
According to Paul Cardinal, an economist with the Association of Construction and Housing Professionals of Quebec (APCHQ), rental housing starts are expected to decline by 32% this year due to financing costs and the slowdown. Result: barely 21,000 homes should be built, compared to 30,700 in 2022.
No time to loose
It is urgent to act to correct the situation, warn the two economists of the cooperative financial group. Due to the time required to build a residence or apartment buildings, you have to step on the accelerator now.
Otherwise, prices risk starting to “rise rapidly again as early as 2024”, they point out. The authors acknowledge that the issue of immigration thresholds has prompted many to suggest that the arrival of newcomers to the country exceeds the country’s capacity to provide “adequate housing”.
However, they are careful to add, immigration should not be held “primarily responsible for the rise in the price” of residences and housing.
Canada is currently building housing at near-record levels, it says. Unfortunately, this has only been observed since the start of the pandemic.
Excerpt from the Desjardins Group study
In the 1970s, as the baby boomers became adults, the pace of housing starts had greatly accelerated, but the pace had then been sustained, recall MM. Bartlett and Desormeaux. The needs are even greater now.
“If Canada was able to rise to the challenge of building more housing on a sustained basis when baby boomers were hitting the market, why couldn’t it now? ask the authors. We believe policy makers are best placed to answer this question. »
The two economists also have a close eye on Ontario, where the Ford government – which wants to build 1.5 million homes – has passed a law intended to stimulate the construction of residential units. The piece of legislation, which has been the subject of criticism, notably provides for the cancellation of certain municipal zoning laws and the elimination of certain development charges.
If Ontario is able to reach an average annual level of 150,000 housing starts over the next two years, this could lessen the impact on average prices in the real estate market.
With Andre Dubuc, The Press
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- 250,000
- Number of housing starts expected in Canada this year
Source: desjardins movement