One of the greatest challenges facing Canadians right now is simply finding a home to buy. Home supply is low across most of the country and a lot of finger-pointing is going on to pinpoint exactly where the problem lies.
There were just 3.5 months of national inventory available in August 2023, according to the Canadian Real Estate Association, almost two months below the long-term metric of five months. This means that if home sales continue at their current pace and no more homes were listed supply would run out after three and a half months. It’s gotten worse throughout 2023, with inventory dropping by almost a month since the start of the year. Meanwhile, as inventory falls, the number of people living in Canada continues to skyrocket.
The Canadian population is now over 40,000,000 according to Statistics Canada. The federal government has also made it clear they want to see that number increase, with a target of 500,000 new permanent residents by 2025. Temporary residents are also adding to that 40,000,000 figure. In 2022 Canada welcomed over 600,000 temporary residents, including international students and foreign workers.
- Read: Analyzing the Impact: Can House Prices Decline if Canada’s Population is Growing at Record Rates?
The question then becomes – are these two related? How does the number of residents affect the number of available homes? And is it the only factor contributing to the inventory shortage? To find out, we analyzed data for the last ten years and compared the population growth of each province to the number of available homes.
How Inventory Has Changed As Population Has Increased
Immediately noticeable is how much inventory has declined in the last few years. Going back to 2013, inventory averaged 6.1 months, above the long-term average. While there has been a steady decline in the last decade, it accelerated around the pandemic, with inventory dropping drastically from 4.8 months to 3.3. As of 2022, inventory was at 2.9 months, with mild improvements throughout 2023.
In the meantime, the population has increased steadily every year, with around 5,200,000 new people in the country in the last decade. The rate at which the population has increased has rapidly accelerated since the pandemic as well. An increase of around 2,100,000 people has occurred in the last three and a half years alone.
On a provincial level, there is a clear indication of how drastically the market has changed along the east coast. In Nova Scotia, there were 10.5 months of inventory in 2016, and 10.7 in New Brunswick. Both have fallen to 3.3 and 3.6 respectively as of August, while the population has increased in both by around 100,000 and 65,000. As both are comparatively smaller provinces, there were fewer homes to start with, so increased demand had a greater impact.
Perhaps the clearest indication of the inventory struggles can be seen in Newfoundland and Labrador. While the population has only increased by less than 5,000 people, the inventory numbers have dropped massively, particularly since 2018, with inventory numbers falling from over 16 months to just 6.3. While still above the long-term national average, it’s a stark decline.
In the larger provinces, inventory struggles are still clear to see, but the impact has perhaps been felt a little less, as numbers were relatively low already. Ontario peaked in 2013 with a provincial inventory of four months, and has steadily declined to just 2.5 in the last decade. British Columbia sits at 4.4, having fallen from 5.6 in 2019.
Is It Just the Population That Has Affected Inventory?
It would stand to reason that as the population has increased so rapidly since 2020, it has directly contributed to the lack of inventory. As 2,100,000 people have joined Canada, the inventory numbers have dropped dramatically. However, there is more to the lack of available inventory than the influx of newcomers.
Additional issues include foreign buyers, a lack of affordable housing options and a lack of new homes being built, with higher residential construction costs and a lack of skilled workers contributing to the latter. The federal government has committed to building 100,000 new homes in the next three years with the Housing Accelerator Fund, and the first city, London, was recently granted funding from the $4 billion budget. Experts have touted a need for a far greater number of homes to be built.
Whether owning or renting, Canadians across the country need affordable and readily available housing options. There are peak seasons, generally spring and fall, when inventory does rebuild and it’s important to remember that this data is a reflection of provincial averages. However, the amount of available properties fluctuates and varies based on the property type, city, and many other external factors. The number of newly listed homes increased by 0.8% from July to August this year. More impressively, there has 24% gain in the number of homes put up for sale between March and July. This has allowed the sales-to-new-listings ratio (SNLR) to fall back to balanced territory. The SNLR hit 67.4% in April, signifying a sellers’ market, but it has since dropped to 56.2% in August, favouring neither buyers nor sellers.
Our real estate agents are here to help you find a home to buy or rent across Canada. Give us a call to learn more about inventory in your real estate market.
