The number of homes under construction in Canada is at an all-time high but it still isn't enough to satisfy the seemingly unending demand for real estate in the country.
Low mortgage rates, stockpiled savings, and changing needs as more people work from home sent buyers into the housing market headfirst during the pandemic. Permit approvers and builders got to work and building accelerated at a rapid pace to try and keep up.
"Their answer has been dramatic. In the past 12 months, builders across the country have poured the foundations (defining a housing start) for the highest number of housing units (260,500) than at any time since 1977," said RBC economist Robert Hogue in a report.
"This represented a 26% or 53,600-unit increase relative to the 2015-2019 average pace (206,900 units)."
Hogue says there are nearly 320,000 housing units under construction, the highest ever and a 12 per cent increase from the end of 2019. About three-quarters are apartments, mostly condos but also rentals, which take longer to build. A huge surge in single-detached home prices and sales during the pandemic indicates builders might not be building the right type of homes.
"While it's unclear how permanent these changes will be, there's a potential that unit size, configuration and location of recently started high-rise projects may fall out of favour," said Hogue.
"Apartments (both condos and purpose-built rental) not only accounted for most (55%) of the housing starts over the past 12 months, but also showed the biggest increase (39%) from the 2015-2019 average."
Not enough homes
Another part of the problem is that it can take a long time to complete construction. Hogue says it can take anywhere from six months to several years to complete, depending on the property type. Because apartments make up a larger share, he says the average construction length has more than doubled over the past two decades. Supply chain issues during the pandemic have also tacked on time.
Construction also isn't keeping up with population growth. Hogue says the 215,000 new units in the past 12 months fall short of the 220,000 average yearly increase in Canadian households in the four years before the pandemic.
The pandemic shift to small-town living meant those areas had the largest increase in construction, followed by medium-sized areas, and big cities. But construction has varied depending on the city.
"Housing starts barely increased in the Toronto region in the past 12 months compared to the 2015-2019 average, rising just 1.4% or 500 units," said Hogue.
"The ramp-up in new construction was a little more vigorous in Edmonton (up 4.1%), Calgary (up 7.2%) and Vancouver (up 10.3%) but still well below the national average (26%)."
Hogue says housing that can be built more quickly like low-rise and mid-rise should be prioritized, as well as the medium-density housing in urban centres which is in short supply.
"This should be done in conjunction with a sharp focus on streamlining regulatory and project approval processes, and tackling skilled trade shortages and other constraints that limit production capacity."
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.