While Canada needs an additional 5.8 million housing units by 2030 to restore affordability in the marketplace, the country only averages about 200,000 new housing completions per year, said Aaron Pittman, senior vice-president and head of Canadian institutional investments at Equiton.
“From concept to occupancy in Canada, on the residential build side, you’re looking at about a five-year window. . . . If this continues to persist, we’re going to see a supply crunch,” he said during a session at the Canadian Investment Review’s 2024 Defined Benefit Investment Forum.
The projections for new housing show 2.2 million of the overall target are designed to be purpose-built rental projects, but Pittman isn’t sure that’s a realistic goal. “We know that, in the past 30 years, we’ve done about 570,000 purpose-built rentals in the country. And now we’re meant to be 2.2 million in the next . . . six years.”
According to immigration patterns, Canada had a 3.2 per cent population growth in 2023 compared to an average of 0.2 per cent for the other countries in the G7, he said. “We’ve done a very, very good job at generating real estate demand in this country.”
On the supply side, Canada is lacking compared to its peers, with 424 units per 1,000 residents, placing it on the bottom, he added, noting the country has exploded its population denominator. “We’ve held the units fairly flat. We’ve gone pretty stagnant on construction and residential construction in this country.”
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Canada is also facing a predominance of work-from-home patterns, noted Pittman, referring to a recent study by Centre for Cities, which found the average full-time worker in downtown Toronto expects to work fewer than three days in an office, compared to about four days before the coronavirus pandemic.
Indeed, the office vacancy in Toronto was about 2.2 per cent in the fourth quarter of 2019, compared to 18.2 per cent at the end of the third quarter of 2024, according to a quarterly report from CBRE Canada.
Moving forward, it will be difficult to project how the Bank of Canada will act and whether it will attempt to enact policy that can help Canada’s housing issues, he said.
“We’ve long looked at the spread between the [U.S. Federal Reserve] rate and the Bank of Canada rate. Essentially, you’re going to either save the Canadian dollar or you’re going to save housing, because it’s going to be very, very difficult to save them both through interest rate intervention.”
Read more coverage of the 2024 DB Investment Forum.