Housing construction activity in Vancouver has decreased by 42% compared to the same period last year, indicating a significant rise in the costs associated with building new homes, as per statements from a prominent advocate in the field. Mike Drummond, the CEO of the Urban Development Institute, highlighted that this current housing market downturn is the most severe in the past three decades, impacting both individuals and their incomes directly.
The term “housing start” is defined by the Canada Mortgage and Housing Corporation (CMHC) as the initiation of construction on a residential property, typically when the foundation is laid with concrete. Vancouver’s decline in housing starts for July stands in stark contrast to other major Canadian cities, with Toronto experiencing a 10% drop and Montreal witnessing a 3% increase, according to the CMHC data.
Tania Bourassa-Ochoa, the deputy chief economist at CMHC, mentioned that various markets, especially Vancouver, Calgary, and Toronto, are witnessing a slowdown in new project commencements. This trend is expected to persist, reflecting the ongoing challenges in bringing new housing projects to market. Despite the subdued housing starts, the existing substantial volume of homes under construction will continue to contribute to the housing supply.
Advocate Drummond emphasized the urgent need to reduce construction expenses to revitalize Vancouver’s sluggish market. He emphasized the necessity to cut down on construction costs, citing that the current price of constructing a building is nearly double what it was in 2015. He also suggested lowering taxes and fees related to housing to stimulate the market.
Furthermore, Drummond highlighted that Canada’s ban on foreign homebuyers is set to expire in 2027 and proposed looking at Australia’s approach to managing foreign buyers as a potential solution. He suggested allowing foreign buyers to purchase new properties while restricting them from purchasing existing inventory to prevent inflation in housing prices.
The findings from CMHC were analyzed by Andy Yan, the director of Simon Fraser University’s City Program, who reiterated the persistent affordability challenges faced by locals. Yan pointed out that a significant portion of the unsold condo units in Vancouver are priced over $1 million, indicating a mismatch between the affordability of homes being built and the purchasing power of local residents.
Yan raised questions regarding the funding of necessary infrastructure for each housing unit, estimating that approximately $107,000 worth of infrastructure is required per unit, encompassing roads, sewage, and water systems. He cautioned against blindly adopting the Australian model of dealing with foreign homebuyers, emphasizing the need for comprehensive data analysis and a cautious approach to avoid repeating past mistakes.
In conclusion, the housing market in Vancouver is experiencing a significant downturn, prompting calls for cost reductions in construction, policy adjustments, and a careful evaluation of foreign investment practices to address the ongoing affordability and supply challenges.