Housing construction activity in Vancouver has declined by 42% compared to the previous July, indicating a significant increase in building costs, according to a representative from the Urban Development Institute. Mike Drummond, the CEO of the organization, described the current situation as the most severe housing market downturn in the past three decades, affecting both individuals and their incomes.
The term “housing start” refers to the initiation of construction on a dwelling, officially recognized when the foundation is laid with concrete, as defined by the Canada Mortgage and Housing Corporation (CMHC). This decline in Vancouver contrasts sharply with other major Canadian cities. While Toronto experienced a 10% decrease in housing starts, Montreal saw a 3% rise during the same period, as reported by the CMHC.
Tania Bourassa-Ochoa, CMHC’s deputy chief economist, noted a reduction in new projects across various markets, particularly in Vancouver, Calgary, and Toronto. She anticipates that housing starts will continue to be subdued in the upcoming months due to ongoing challenges in launching new projects. However, the existing high number of homes under construction will contribute to the housing supply.
Addressing the cost concerns, Drummond emphasized the need to lower construction expenses by cutting taxes and fees related to housing. He pointed out that construction costs have significantly increased over the years, stressing the urgency for cost reductions to boost Vancouver’s struggling housing market. Additionally, Drummond highlighted the upcoming expiration of Canada’s ban on foreign homebuyers in 2027 and suggested exploring Australia’s approach to regulating foreign purchases to prevent inflation in the existing inventory prices.
Andy Yan, director of Simon Fraser University’s City Program, analyzed the CMHC data and underscored the persisting affordability challenges in Vancouver’s housing market. He highlighted that a considerable portion of unsold condominium units in Vancouver are priced above $1 million, reflecting a mismatch between what is being built and what locals can afford.
Yan further raised concerns about the infrastructure costs associated with each housing unit, estimated at around $107,000, encompassing essential elements like roads, sewage, and water. He questioned the responsibility and funding for such infrastructure necessities, emphasizing the need for careful consideration before adopting foreign homebuyer policies similar to Australia’s model.
Yan cautioned against hasty decisions based on a single foreign practice, emphasizing the importance of thorough data analysis to avoid repeating past mistakes of allowing foreign capital to distort the residential market. He stressed the need for comprehensive strategies tailored to Canada’s unique housing challenges.
