A new report highlights that the construction sector lags the country's needs
Canada is currently building homes at a rapid pace – but Royal Bank of Canada (RBC) assistant chief economist Robert Hogue has questioned how long that pace can be sustained amid a series of challenges.
Canada’s homebuilding industry reached a historic milestone last year with a record 260,000 completed housing units, Hogue noted in a new report, with that achievement narrowly surpassing the previous record of 257,000 units set five decades ago in 1974.
The report indicates that homebuilders responded vigorously to the pandemic-era housing demand surge, though the impact on available housing stock took several years to materialize due to construction delays and complexity of large-scale projects.
“Homebuilders were working on 345,000 units of all types in the first quarter of this year across census metropolitan areas,” noted Hogue, highlighting the robust construction pipeline. In Toronto specifically, unsold condos under construction are six times higher than standing inventory.
Despite these impressive numbers, Hogue warns that the industry faces significant headwinds. Construction costs have increased 36% since 2021, making it increasingly difficult for builders to offer affordable homes while maintaining profit margins. Additionally, pre-construction sales have plummeted to levels “unseen in decades” in Toronto, potentially disrupting the future pipeline of new housing.
The report identifies several factors affecting the market’s trajectory. The federal government’s recent immigration policy pivot is expected to significantly slow household formation, potentially easing pressure on housing demand. Meanwhile, the inventory of move-in ready units has rebounded toward pre-pandemic levels, with condos representing nearly half of available inventory.
A bright spot in the report is the renaissance in purpose-built rental apartment construction, which has outpaced all other housing types in Canada’s large urban areas since 2022, following “decades of lacklustre activity” in this segment.
While housing completions reached an all-time high, Hogue emphasizes that this expansion “still fell well short of the number of units required to close the housing supply gap,” suggesting that despite record construction, Canada continues to face significant housing challenges.
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