This week it was announced that Canada’s population grew by approximately 430,000 people over the last quarter (+1.1%). And that it represents the highest population growth rate of any quarter since the second quarter of 1957. Even more impressive, though, is the fact that in the first 9 months of this year we have already added over 1 million people in total. This beats all full-year periods since Confederation in 1867!
Here’s what all of this starts to look like visually:
The unfortunate side of these records is that it is coming at a time where we’re, perhaps counterintuitively, building a lot less new housing; which is to say that construction starts are declining. In fact, I was on a call this week where people who examine development and construction costs all day were predicting a 5-6% decline in hard costs in the Toronto region next year. And this is a direct result of fewer new projects getting started.
Broadly speaking, this is how things tend to work in real estate development: there are heavy lags between changes in demand and changes in supply because of how long it takes to build new buildings. But what’s happening right now is more than this. Interest costs are impacting everyone. And investor interest in pre-construction homes has softened significantly, demonstrating how much our industry relies on individual investors. Many projects cannot go.
What I ultimately think this is going to do is exacerbate our current supply-demand imbalances. Meaning that when the market does come back — and it of course will — it’s going to come back with a vengeance. And that’s because it is going to need to catch up to all of the new demand that is accumulating as we speak.
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