Canada's population is experiencing rapid growth, but housing starts are plummeting, raising concerns for the future of Toronto's housing market. This article explores the implications of these trends and what they mean for real estate in the Greater Toronto Area (GTA).
In the first four months of 2024, Canada's working-age population grew by 411,000 people, a 47% increase over the same period last year and nearly quadruple the average growth from 2007 to 2022. This population boom is putting immense pressure on the housing market as the demand for homes rises with the increasing number of residents.
Despite the population surge, new home construction starts in Ontario is slowing down, reverting to 2018 levels. Housing starts in April 2024 were down 37%, and experts predict further declines. This slowdown is most pronounced in the condo market, which is expected to see the lowest sales volumes in nearly two decades.
A key factor that could influence the housing market is the federal government's plan to scale back the number of non-permanent residents in Canada. Canada’s population is growing by approximately 1.2 million people annually, but the government aims to reduce this to 300,000 annually. This policy could significantly reduce demand for new housing, particularly rentals, as non-permanent residents are more likely to rent than buy.
Impact on the Condo Market
The condo market has a significant amount of supply currently in the pipeline. The number of condos currently under construction is near record highs and well above that of low-rise houses. Most of these condos are intended for rental, often bought by investors. If the government reduces the number of non-permanent residents, demand for rentals could decline, putting further downward pressure on rents.
Low-Rise Housing Market Stability
The market for low-rise houses is expected to remain more stable despite the population changes. This stability is due to sustained demand from permanent residents, who are more likely to purchase homes. However, high prices and interest rates are making it difficult for many to afford these homes, leading some residents to leave Toronto and Ontario for more affordable regions like Alberta and Eastern Canada.
Future Trends and Considerations
The outlook for Toronto's housing market depends on several factors:
Population Growth: If the federal government reduces the number of non-permanent residents, the demand for rental housing may decrease, affecting the condo market more than the low-rise market.
Construction Rates: The slowdown in housing starts, especially for low-rise homes, means that supply is not keeping up with demand. This imbalance could continue to support high prices for low-rise homes.
Interest Rates: Current high interest rates are limiting affordability, affecting both rental and purchase markets. If rates remain high, this could continue to suppress sales volumes and price growth.
In conclusion, while Toronto's condo market may face challenges due to potential decreases in rental demand, the low-rise market will likely remain stable due to sustained demand from permanent residents. However, affordability issues and shifting demographics will continue to shape the landscape of Toronto's housing market in the coming years. Buyers and investors should stay informed about these trends to make smarter real estate decisions.
Have questions about your own moves in the Toronto area as a buyer, seller, investor or renter? Book a no-obligation consult with John and his team at a Realosophy here: https://www.movesmartly.com/meetjohn
John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).
May 28, 2024
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