We are currently experiencing a shortage of homes in Ontario. Why is this and what are the implications going forward?
Most of the recent builds in our region have been multi-unit, one-bedroom apartment buildings and condos, built primarily to serve millennials in the area, including students, young couples and those in the growing tech sector. What we are missing, practically speaking, are 3-4 bedroom homes for families. It has less to do with affordability and more to do with supply. There simply aren’t enough of them for sale. The problem isn’t just for people looking to buy a home today, but for those in the future as well should supply-side issues not be addressed.
The Ontario Home Builders Association recently announced that we will need at least one million homes in the province over the next decade to handle the increase of immigrants and young families. Furthermore, growth in Waterloo Region is projected to hit 950,000 by 2051, so ensuring an adequate housing supply for everyone going forward is critical for sustaining this anticipated growth.
What can we do?
The KW Association of Realtors’ Housing Markets Insights panel is looking for solutions. Suggestions include constructing more 3-bedroom condo and apartment options, and shifting the way municipalities think about expanding their inventories. On the personal side, if you own a large home, it may present an opportunity for you to create a duplex and capitalize on the current situation while also helping to off-set the supply crunch.
How do things look on the financial side?
When house prices are extremely high, as they are here in the region, it’s great for sellers who may be moving out of the area to more affordable locations, but for people who want to stick around it can seem unaffordable to move. For example, those wishing to downsize may be able to sell their home for a good price, but will be expected to pay relatively more (especially as bidding wars drive up prices even further) for a significantly smaller home or property.
Although prices are not expected to come down, the annual increase in the cost of a home IS expected to slow down considerably according to Robert Hogue, a senior analyst for the Royal Bank of Canada (KW Record, 2021/10/06). The growth in home prices in 2021 is currently at ~30% while overall price growth in 2022 may be as low as 2%. If interest rates remain low, at least for the next year or so, buying AND selling may prove to be more affordable.
