Toronto and Vancouver’s real estate markets have responded to surging prices and a growing demand for homes with a supply of new housing that is “significantly weaker than other Canadian metropolitan areas.”
The disparity between supply and demand has been largest in the two cities, but “we do not fully know why this is the case,” said the Canadian Mortgage and Housing Corporation, in a report it released on Wednesday (February 7) on escalating house prices in the country’s large metropolitan centres between 2010 and 2016.
Data gaps are keeping CMHC from developing a full picture of why Montreal, Calgary, and Edmonton don’t have as big of an inconsistency between supply and demand as Toronto and Vancouver do, but CMHC’s deputy chief economist Aled ab Iorwerth said he has noticed Calgary and Edmonton responding to demand with “horizontal sprawl.”
As for Montreal, he told The Canadian Press that the city already has “a large rental sector, there is perhaps an acceptance of living in denser housing there, and they seem to be more ready to convert industrial land into housing.”
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Helping housing supply catch up to demand in any of the country’s major cities will involve combating urban sprawl and increasing densification, while dealing with affordability, infrastructure, and environmental issues, the CMHC report said.
CMHC also noted that a lack of supply in Vancouver and Toronto had buyers gravitating towards condos — which were more plentiful and have seen a spike in investor demand — as well as high-end homes. Almost all the growth that CMHC saw in prices came from expensive, single-detached homes.
“While Toronto and Vancouver showed large and persistent increases in prices, there was only modest price growth in Montreal,” the report said. “Home prices in oil-dependent Calgary and Edmonton ended the period slightly higher.”
Between 2010 and 2016, CMHC found house prices jumped by 40% in Toronto, with 40% of that rise attributable to growth in jobs, population, disposable income, and previously low mortgage rates.
Those factors contributed to 75% of the 48% increase Vancouver saw in the same time frame.
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