Is now a good time to buy?
June 29 2022
The headlines in the papers are painting a daunting picture of housing market declines as we see broader market activity and interest rates being impacted by multiple global events, all translating as a shift in buyer sentiment.
However, a fundamental fact persists within the Canadian and Ontario housing market which have been driving our markets’ exponential growth, and we don’t see this changing anytime soon.
Housing Demand in Ontario far outweighs housing supply.
And will do so for the foreseeable future.
Where is the demand coming from?
In Jan 2022, the federal government increased our annual immigration targets to the highest levels on record, and stated it was needed to offset the negative economic and fiscal impacts of an aging population and declining birth rates. This creates conditions for a surge of new permanent residents; it boosts our country’s population and immediately boosts the need for housing in major and nearby city centres.
In contrast to an increase in population, by 2030, CHMC (Canadian Housing Mortgage Corporation) estimates that close to 19 million new housing units will be constructed. This represents a shortfall of 3.5 million new units, desperately needed to ensure housing affordability (through supply).
In Ontario alone, we expect to see 2 million new residents come to our province over the next 10 years, and based on current trends, see only 1 million new housing units being built.
‘Anthony Passarelli, a CMHC senior analyst, said that if immigration reaches these record-high levels and Canada doesn’t respond by increasing its housing supply, the effects on the housing market could be noticeable. “We will likely go through a similar situation, where you see another price surge and the ripple effects of people getting priced out of the larger population centres and moving further out,” he added.’
With the shortage of homes, and Canada’s immigration policy catering to newcomers with significant job skills (allowing them to integrate more quickly) and with existing wealth (acquired outside of Canada), housing prices have been pushed upward.
In the Toronto region, the country’s largest job centre, the average price of a home is above $1-million and many of the surrounding cities are nearing or above that price. That has pushed Canadians and newcomers out of Toronto and into smaller regions in Southern Ontario; as such, we’ve seen strong growth in Niagara, London, Kitchener-Waterloo and Cambridge.
Today, there is an acute shortage of housing in those smaller cities.
What are the biggest hurdles to overcome to meet an affordability/supply target by 2030?
As per a report by the OHBA (Ontario Home Builders Association), three areas need to be addressed:
- we need to overcome delays between when a project is proposed and when it starts due to long approval processes
- we need to manage the skilled trade shortages and supply chain challenges
- we need to manage the increase in supply which puts pressure on the cost of construction.
Clearly it will take a singular focus from all levels of government to make this happen, and it will take time.
In the meantime, as our population grows and the demand to invest in homes further and further away from Toronto, Brampton and now Milton continues to increase, we expect to see stable if not rising housing prices in Cambridge and the surrounding areas. This represents opportunity, both to buy a beautiful new home for your family, but also to invest and provide rental opportunities for those in need of a home to live in.
And we don’t see this changing anytime soon.