Canadian housing market will take another decade to rebalance

We believe that building enough homes to restore housing affordability across Canada will likely take another decade. To balance the housing market, we estimate 4.2mn new dwellings need to be built between 2024-2035, including 2.9mn to satisfy growth in households and 1.3mn to make up for past supply shortfalls, ensure a normal vacancy rate, and to remedy suppressed household formation due to unaffordability.

What you will learn:

• While it will take a long time to construct the new dwellings Canada needs, we expect growth in the housing supply will be stronger than housing demand in the coming decade. This means house prices will rise more slowly than median household incomes. Housing affordability should progressively improve, with home ownership back within reach for typical households by 2035.
• Our analysis finds that the Canada Mortgage and Housing Corporation’s (CMHC) aspirational target to build 3.5mn houses by 2030, on top of those required for household formation, is not feasible and significantly overstates the actual number of new dwellings needed to restore affordability.
• Moreover, we have key concerns regarding such a massive potential addition to Canada’s housing supply. It would result in about 1 in 5 dwellings being unoccupied, raising the risk of an over-supplied housing market and a prolonged house price slump, especially as aging baby boomers begin selling or bestowing their homes in the mid-to-late 2030s.