Canada’s Housing Market Faces Regional Disparities Amid Rising Sales

Canada’s housing market is experiencing a resurgence in sales, but this revival is marked by significant regional disparities. As of August 2023, the national benchmark price for homes has dipped to $687,300, reflecting a 3.5 percent decline compared to the previous year. In major cities like Toronto and Vancouver, housing starts are at critically low levels, indicating a complex landscape that challenges the notion of a unified market recovery.

With the introduction of the Build Canada Homes initiative, Prime Minister Mark Carney has committed to addressing the ongoing housing crisis. This initiative, which promises $13 billion in initial funding, aims to develop non-market housing on federal land in collaboration with the private sector. Proponents view this as a necessary step towards increasing affordable housing supply, while critics argue that it could introduce additional bureaucratic hurdles.

Regional Imbalances in Housing Supply and Demand

The Canada Mortgage and Housing Corporation (CMHC) reported that housing starts across seven key metropolitan areas remained stagnant in the first half of 2023, compared to the same period in 2022. This apparent stability conceals stark regional differences. In Toronto, housing starts have reached their lowest per capita levels since 1996, while both Toronto and Vancouver would need an increase of 30 to 70 percent in new construction over the next decade to restore affordability.

Developers cite several barriers to new projects, including high municipal fees, prolonged approval processes, and weak preconstruction sales. These challenges contribute to tight supply, even as demand gradually rebounds. In contrast, cities like Winnipeg and St. John’s have seen double-digit annual price increases, largely driven by stronger job markets and relative affordability.

Despite the overall national price decline, recent trends indicate a cautious return of buyers to the market. The Canadian Real Estate Association (CREA) reported a 1.1 percent increase in home sales from July, with a total of 40,714 homes sold nationally in August—marking the busiest August since 2021. This uptick reflects pent-up demand, as potential buyers react to slightly lower borrowing costs and more favorable pricing conditions.

Political and Economic Context of Housing Initiatives

As Parliament reconvenes, the housing issue is taking center stage, with the Conservative Party, led by Pierre Poilievre, voicing concerns about the new agency. They argue that Build Canada Homes could impede progress rather than facilitate it, with ongoing debates highlighting the need for effective solutions to the housing crisis.

The political landscape is further complicated by economic factors, including a recent fiscal update from British Columbia. The province’s financial outlook has worsened, with a projected deficit of $11.6 billion this fiscal year, partly attributed to a slowdown in the housing market and the recent elimination of the carbon tax.

As Canada navigates these multifaceted challenges, the future of its housing market remains uncertain. The interplay between government initiatives, regional disparities, and economic conditions will significantly influence the trajectory of housing affordability and availability across the country.