Statistics Canada recently published some data (from 2022) looking at investors in the condominium apartment market. Here is what they believe to be the share of condominium apartments used as investment properties in Ontario's 10 largest census metropolitan areas:

It's worth noting that this is after excluding condominium buildings where every single suite is owned by a single investor. This is/was most prevalent in London, and it's the result of there being property tax benefits to registering a condominium (individual unit assessments), even though for all intents and purposes it's a rental building (building in its entirety assessed).

The article goes on to rightly suggest that the prevalence of investors, and the way that condominiums are financed, could be leading to the construction of more buildings with smaller suites. Here's the proportion of new condominium apartments under 600 square feet by period of construction:

The unsurprising takeaway is that condominium suites have gotten smaller. In the 1990s, the average condominium apartment built in the Toronto CMA was 947 square feet. This is compared to 640 square feet after 2016. And the same thing happened in Vancouver, which went from an average of 912 square feet to 790 square feet.

Investor preferences certainly have something to do with this. But what the article doesn't specifically mention is that this phenomenon is also a direct response to rising build costs: making suites smaller was how the market tried to maintain some level of affordability. Put differently, imagine how expensive new condominiums would be if the average size was still 947 square feet.

But there are obviously limits to this. I was with one of our architects the other week and he made an interesting comment to me. He said, "Brandon, before when build costs used to go up and things got less affordable for consumers, we could just make the suites smaller to offset the impacts. But I don't see how we can go any smaller now. We've reached the limit."

This is one of the reasons why I think this downturn is going to ultimately be a good thing for Canada's housing markets. It's a reset. It's forcing everyone out of complacency and, hopefully, it means that when the next cycle begins we'll be starting from a better foundation.

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.

According to the Globe and Mail, Canada's census metropolitan areas (or city regions) grew by about 574,000 people for the year ending July 1, 2022. This is the highest number on record (or at least since Statistics Canada started tracking this figure in 2001), which is not entirely surprising given that immigration flows slowed dramatically during the pandemic.

The other thing that the pandemic did was accelerate a trend of people leaving the biggest city regions for other parts of a province. During this same time period, Vancouver saw a net intraprovincial migration loss of about 14,300 people, Montreal saw about 29,500, and Toronto saw 78,077. But again, this was a trend that was building prior to the pandemic:

It is perhaps no surprise that these losses follow the order of our largest city regions. And it once again suggests that we are not doing enough when it comes to housing supply/affordability and homes for young families. These intraprovincial losses are not because these city regions aren't desirable. It's in fact the exact opposite.