Housing construction activity in Vancouver plummeted by 42% in July compared to the same period last year, indicating a significant rise in building costs, as per insights from a development advocate. According to Mike Drummond, CEO of the Urban Development Institute, this decline marks the most severe housing market downturn in the past three decades, impacting real individuals and their incomes.
The term “housing start” refers to the initiation of construction on a residential property, officially recognized when concrete is poured into the foundation, per the Canada Mortgage and Housing Corporation (CMHC).
Vancouver’s sharp year-over-year decrease in housing starts stands in stark contrast to trends observed in other major Canadian cities. While Toronto experienced a 10% decline in housing starts, Montreal saw a 3% increase during the same period, according to data from the CMHC. Vancouver recorded 1,810 housing starts in July, with Toronto and Montreal reporting 1,540 and 2,458 starts, respectively.
Tania Bourassa-Ochoa, deputy chief economist at CMHC, noted that multiple markets, notably Vancouver, Calgary, and Toronto, are witnessing fewer new construction projects commencing. She anticipates that housing starts will continue to slow down in the upcoming months due to ongoing challenges in bringing new projects to the market, although the existing high volume of homes under construction will contribute to the housing supply.
To address the situation, Drummond emphasized the urgent need to cut down construction expenses. He highlighted the significant increase in building costs over the years and called for reductions in taxes and fees related to housing projects.
Additionally, Drummond pointed out that Canada’s ban on foreign homebuyers is set to expire in 2027, suggesting that Canada could learn from Australia’s approach in managing foreign buyers. Unlike Canada, Australia permits foreign buyers to acquire new properties but prohibits them from purchasing existing homes, preventing inflation in the pricing of existing housing stock.
Andy Yan, director of Simon Fraser University’s City Program, highlighted the ongoing affordability challenges indicated by the CMHC findings. He emphasized that a substantial portion of unsold condo units in Vancouver exceed $1 million, indicating a mismatch between the affordability of homes being constructed and local income levels.
Yan further raised questions about the allocation of infrastructure costs related to housing units, estimating that each unit requires approximately $107,000 worth of infrastructure, including roads, sewage, and water. He emphasized the need for a clear strategy on funding these essential infrastructure components.
Regarding the discussion on foreign homebuyer policies, Yan urged caution, stating that copying a single approach from another country may not necessarily lead to successful outcomes. He emphasized the importance of comprehensive data and strategic planning to avoid repeating past mistakes.
In conclusion, the decline in housing starts in Vancouver has sparked conversations about affordability, construction costs, and foreign homebuyer policies, highlighting the need for strategic interventions to address the housing market challenges.