The Globe and Mail just published this article about Canada's real estate markets. It's behind a paywall, but if you're able to access it, you'll find 10 housing charts. The first is called "Winners and losers," and what it shows is the percentage change in CREA's home price index since February 2022 — which, in hindsight, was the top of the market. (I don't know what the end date is for this data, though.)
The first thing you'll see is that, very broadly, there's Southern Ontario and Greater Vancouver, and then the rest of Canada. Prices have fallen materially in Canada's most expensive markets, whereas in cities like Calgary, Saskatoon, and Moncton, nominal home prices are up by double-digit percentages. There isn't just one Canadian market.
The other thing I found interesting is the title "Winners and losers," because it reminded me of the great paradox of modern housing policy. And by this I mean: which cities are winning and which are losing? If you already own a home, then winning is positive price appreciation. But if you don't already own a home and you'd like to in the future, well then, falling home prices is winning — they've just become more affordable.
Not surprisingly, it's hard solving for two opposing kinds of winning.
The term "missing middle" is typically used to refer to a missing scale in our built environment. It is that middle scale of housing between low-rise and high-rise. But there's another way to think about it and that is in terms of the market that the housing is serving.
Over the last cycle, cities like Toronto saw a kind of "barbell" dynamic. Meaning, new supply tended to target the poles. It was delivering for young professionals and young couples on one end and for downsizers and wealthy retirees on the other. But what has been missing is new supply that targets the belly of the market. And by this I mean something like low-amenity, well-designed, mid-market homes.
Of course, there are good reasons for why this is the case. The cost structure of new developments makes it so that the only feasible way to underwrite new projects is to maximize rents through smaller suite sizes and copious amounts of amenities. It is not that developers don't want to do it any other way, it's that they generally can't.
This is the paradox underpinning Canada's housing crisis. Yes rents are softening and vacancies are rising right now, but it would still be right to say that we are in a crisis. And that's because it largely exists in a different segment of the market — the biggest one.
In my view, this is our great challenge and opportunity as we move through this downturn. And I would bet that once we unlock the right model(s), we will see just how pent-up the demand for housing is in cities like Toronto and Vancouver.
