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Housing starts in Vancouver are down 42 per cent compared with last July — a signal, according to a development advocate, that it’s become too costly to build new homes.
“It’s the worst housing market and housing downturn in the last 30 years,” Mike Drummond, CEO of the Urban Development Institute, told CBC’s On The Coast.
“That’s real people. Real paycheques.”
A housing start signals the beginning of construction on a residence and is counted when concrete is poured into a foundation, according to the Canada Mortgage and Housing Corporation (CMHC) definition.
Vancouver’s year-over-year drop in July comes in stark contrast to other big cities in the country.
By contrast, Toronto housing starts dropped by 10 per cent, and Montreal actually experienced an increase of three per cent, according to the CMHC.
“Fewer new projects are being started in many markets, notably in Vancouver, Calgary and Toronto,” said Tania Bourassa-Ochoa, deputy chief economist for CMHC.
“Based on the recent slowdown in activity, housing starts are likely to remain subdued over the coming months, reflecting ongoing challenges in bringing new projects to market.”
However, she noted the large volume of homes already under construction will still be adding to the housing supply.
Cut costs, says advocate
For Drummond, the findings are a call to action.
“We need to reduce construction costs,” he said. “You know, a building that we would construct in 2015 would be about half the price it is today. We need to lower taxes and fees on housing.”‘
Drummond also noted that Canada’s foreign homebuyer ban is set to expire in 2027, and said that Australia could serve as a potential model for how to deal with foreign buyers.
“They allow foreign buyers to purchase new product,” he said. “But they don’t allow people to buy existing inventory and bid up the cost of existing stocks.”
Are homes affordable?
Andy Yan, the director of Simon Fraser University’s City Program, said the new CMHC findings highlight ongoing affordability issues.
“It’s also talking about the existing stock and how within that existing stock, it isn’t necessarily affordable for local incomes,” Yan told CBC’s On The Coast.
By his calculations, about 70 per cent of the condo units built but not sold in Vancouver cost over $1 million.
“What we’ve built hasn’t necessarily met with what we can afford,” he said.
Responding to Drummond’s call for lower construction costs, Yan said it’s worth noting that each housing unit — by his estimation — requires about $107,000 worth of infrastructure to come online.
This includes roads, sewage and water.
“How do you provide, and who should pay for that?” Yan asked.
He also said Canada should be careful in considering copying the Australian model of dealing with foreign homebuyers.
More data is required, and copying a single practice from a country isn’t enough to guarantee success, he said.
“It’s not just following just the practice of allowing foreign capital to enter our residential market — as we’ve learned, that’s how we got in this mess in the first place,” Yan said.
Vancouver condo developers are struggling to sell units, and some are now turning to a strategy borrowed from Toronto: bulk sales to investors. CBC’s Stephen Quinn spoke with commercial real estate broker Megan Johal on what this strategy is — and whether it could take hold here in B.C.
