Over the last few months, Prime Minister Justin Trudeau spoke repeatedly about a Canadian housing crisis and the need to “build more homes, faster”. The removal of GST on purpose-built rental buildings was a good step, and a tangible manifestation of the political impetus to increase the supply of housing.
What’s Happening
In the residential property market, transaction activity is down 15 per cent nationwide, and more in some markets. However, as my colleague Tony Letvinchuk pointed out in a recent Post Media interview, the transaction volume for residential development land is down much more substantially.
While data is somewhat less available for commercial real estate transactions, reports from Altus Group and others indicate an annualized slowdown in building land sales activity of some 40+ per cent in Toronto and 80+ per cent in Vancouver. This relates to other ongoing challenges to project feasibility faced by builders, including an increase in construction costs of approximately 50+ per cent since 2020, and increased financing costs (resulting from the rise in interest rates).
Increasing costs correspondingly decrease the amount that a developer could pay for a prospective site, contributing to the dramatic decrease in transactions of residential development land.
But what are the implications of the slowdown in development land activity for the supply of housing?
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This article originally appeared on RealEstateMagazine.ca
