The Worst Kept Secret Is Out: Canada’s Housing Market Is the Most Undersupplied in the G7

While it does not take a market expert to know that we have a supply problem, the quantum and dire shortage compared to our G7 colleagues might.

Scotiabank’s Chief Economist Jean-Francois Perrault has been a pioneer in analyzing G7 housing data and his findings are alarming.

The supply of Canadian housing simply has not kept up with population growth pointing to a near-record imbalance between the supply of housing and demand.

Despite the COVID-19 induced stagnation in population growth in 2020 it is set to get EVEN WORSE as normalcy returns with the increased Immigration Plan of 1.2MM new people coming to this country over the next 3 years.

Canada has 424 housing units per 1000 residents – well below the G7 average of 471 – to make good on the shortfall and catch up with the G7 average would mean building a massive 1.8MM new homes.

Scotiabank is not advocating the unrealistic waving of a magic wand with millions of new homes being built immediately. They are making a realistic and commercially viable plea for vested parties to come together to solve a national and political hot potato – the housing supply crisis.

“We propose the urgent creation of a national table composed of federal, provincial and municipal authorities, along with real-estate developers, investors and civil society organizations to comprehensively identify and tackle the obstacles to more responsive supply in all segments of the housing market”

In GTA the imbalance is the worst in the country by a wide margin – well below the national average which is significantly worst than the G7 shortfall.

For the immediate future, the GTA is a housing supply disaster.

A short-term solution is unrealistic and pricing to make an equilibrium of strong demand and a depleted supply are expected to chase prices higher in the short to mid-term.

New Zealand, a country of only 5MM people has an even more insoluble supply crisis and nose-bleed price housing price increases. Its government has recently become the first industrialized country to instruct the independent Reserve Bank of New Zealand (RBNZ) to consider housing prices in making Monetary Policy.

The next release of Monetary Policy Statements (MPS) from RBNZ will be keenly watched around the globe and could be an influential arbiter for a Canadian housing supply crisis solution.

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