Housing construction activity in Vancouver has seen a significant decline of 42% compared to the same period last year. This decrease is being attributed to the escalating costs associated with building new residential properties, as highlighted by Mike Drummond, the CEO of the Urban Development Institute. Drummond described the current situation as the most severe housing market downturn in the past three decades.
In Vancouver, a housing start indicates the commencement of building a residence, marked by the pouring of concrete into the foundation, according to the Canada Mortgage and Housing Corporation (CMHC). The latest statistics reveal that Vancouver experienced a substantial drop in housing starts in July, unlike other major Canadian cities. While Toronto witnessed a 10% decline, Montreal saw a 3% increase in housing starts during the same period.
The figures show that Vancouver recorded 1,810 housing starts in July, with Toronto and Montreal reporting 1,540 and 2,458 starts, respectively. Tania Bourassa-Ochoa, the deputy chief economist at CMHC, mentioned that various markets, notably Vancouver, Calgary, and Toronto, are observing fewer new projects. She anticipates that housing starts will remain subdued in the forthcoming months due to challenges in launching new developments to the market.
Drummond emphasized the urgent need to reduce construction costs to revitalize Vancouver’s sluggish housing market. He pointed out that construction expenses have surged significantly, with buildings constructed in 2015 costing only half of what they do presently. Drummond advocated for reducing taxes and fees related to housing to stimulate construction activity.
Furthermore, Drummond highlighted the upcoming expiration of Canada’s ban on foreign homebuyers in 2027 and suggested looking at Australia’s approach to managing foreign buyers. He proposed allowing foreign investors to purchase new properties while restricting them from acquiring existing inventory to prevent inflating prices.
Andy Yan, the director of Simon Fraser University’s City Program, emphasized the ongoing affordability challenges in Vancouver’s real estate market. He noted that a significant portion of unsold condo units in Vancouver are priced above $1 million, indicating a mismatch between the affordability of homes and local incomes. Yan also raised concerns about the infrastructure costs associated with housing units and questioned who should bear these expenses.
Yan cautioned against blindly adopting the Australian model of dealing with foreign buyers, insisting that comprehensive data analysis is essential. He stressed the importance of not solely relying on foreign capital to stabilize the residential market, emphasizing the need for a more balanced approach to prevent similar market challenges in the future.