According to the Canada Mortgage and Housing Corp. deputy chief economist. Canada's two most expensive cities for housing aren't building enough new homes, and that's driving people to Edmonton.
Aled ab Iorwerth said data already shows an influx of people moving from Vancouver and Toronto to the capital of Alberta, and it will only get worse if more supply isn't created in the two cities that are regularly ranked as Canada's most expensive cities.
“It’s already happening,” ab Iorwerth said in an interview with the Financial Post following a presentation at the Veritas Great Canadian Real Estate Conference this week.
According to CMHC, the Toronto region had a housing inventory of about 2.5 million homes as of the third quarter of 2024, but would need just over three million homes by the fourth quarter of 2035 to maintain current affordability levels. Vancouver's inventory of 1.1 million housing units would need to increase by 24 per cent over that period to keep pace with the current population without even compromising affordability.
“Edmonton and Calgary are relatively cheaper, and if Vancouver doesn’t increase its housing supply, people will move,” Iorwerth said.
Average sales prices in the Toronto region fell about four per cent in September compared to a year ago, but were still at $1,077,602 last month, according to the local real estate board. Vancouver is still the most expensive city in the country with a reference price of $1,142,100 in September, down 3.2 percent from a year ago.
In Alberta's capital, the average sales price increased 2.8 per cent compared to last year, but was still just $452,849.
Even in cheaper cities like Montreal, where the average price of an existing home was seven percent higher in September than a year ago but is still just $632,500, the economist predicts the lack of new construction will drive people away.
“Even in Quebec, the challenge is that if Montreal doesn't increase its housing supply, people will move to places like Trois-Rivières and Quebec City,” said ab Iorwerth. “It's concerning because I believe people should move to where there are job opportunities and better careers. They shouldn't base their decisions on housing costs where they live.”
In Vancouver and Toronto, the economist noted that regulatory burdens, including issues such as permitting delays and land use reviews, were high enough to create challenges for construction.
“In addition, the development fees are quite high,” said the economist.
A study by CMHC found that Toronto leads the country in development costs, while Vancouver ranks second.
In some major Canadian cities, government taxes can account for more than 20 percent of the cost of building a housing unit. In the country's largest city, Crown Corp. said prices could be up to 24 percent lower without the fees.
The economist noted that affordability issues exist across the country and can be alleviated with more supply across Canada.
“If we want to improve affordability in Toronto and Vancouver, we need significantly more housing supply,” he said during his presentation. “Because of real estate prices, people are starting to move. Edmonton doesn't have to build more housing than is planned, but if Vancouver and Toronto don't get their act together, Edmonton will have to build a lot more housing because people will leave Toronto and Vancouver.”
ab Iorwerth also said the job market could become a pressing issue for Canadians with housing debt, and stressed that CMHC is closely monitoring the two million mortgages that will be refinanced over the next two years
“That's because in 2020 and 2021 everyone took out five-year mortgages and now it's coming up for renewal and interest rates are obviously going to be higher,” he said. “There is a silver lining: interest rates are lower than they were a year ago.”
• Email: gmarr@postmedia.com