The recent webinar, “Multi-Family Outlook for Canada: Hope Springs Eternal,” delivered by Carl Gomez, Chief Economist and head of Market Analytics for Canada, provided an in-depth analysis of the current trends and future projections for the Canadian multifamily housing market. Here are the key takeaways and insights from the presentation, which highlight the dynamics shaping this vital sector.
Demand Fundamentals in Overdrive Canada’s multifamily housing market is experiencing robust demand, primarily driven by the country’s fast-growing population due to immigration. Additionally, interprovincial and intraprovincial migration trends indicate a significant outflow from major cities to smaller peripheral towns such as Guelph, Brantford, Kitchener-Waterloo, and Peterborough.
Urbanization Trends and Demographics The rate of urbanization in Canada has slowed since 2010, influenced by an aging population. The fastest-growing age cohort is now those in the prime homebuying age, alongside a notable increase in the senior population. This demographic shift has critical implications for housing demand, particularly for senior housing.
Housing Prices and Affordability Long-term upward pressure on house prices continues, with a historical rate of return at 8%. The burden of homeownership in Canada is now worse than in the U.S. before its financial crisis, making renting a more attractive option. This trend is supported by data showing that renting remains much cheaper than owning a home in Canada.
Supply Challenges Canada faces a significant structural challenge with housing supply. Despite federal government plans to build 550,000 units annually between 2025 and 2031, the country is still recovering from nearly three decades of underinvestment. The multifamily rental market remains tight, and recent declines in construction are concerning, given the ongoing population growth.
Market Conditions and Rent Growth While multifamily rent growth spiked recently, it has peaked due to rent controls, the inability to turn units, and fewer new units being added to the inventory. However, major urban markets still have growth potential, albeit at a slower pace.
Investment Market Insights Investors are increasingly interested in “beds” (residential properties) and “sheds” (industrial properties), with apartment values stabilizing and cap rates showing signs of bottoming out. Insured financing and other government measures continue to support pricing. Private investors dominate the residential market, and Canadian Residential REITs have been modestly outperforming.
Key Takeaways
- Demand Intensification: Housing demand, both for ownership and rental, is on the rise, further fueled by policy measures.
- Supply Shortages: A structural undersupply persists, exacerbating the affordable housing crisis for low-income households and the “missing middle.”
- Rent Growth Dynamics: Average rent growth is decelerating but is expected to keep up with or outpace inflation over the long term.
- Investor Preferences: Investors favour apartment rentals due to their defensiveness and attractive financing options. They prefer new developments over existing stock due to challenges with deferred maintenance and rent controls.
The multifamily housing market in Canada presents both opportunities and challenges. By understanding these dynamics, investors and stakeholders can better navigate the market to make informed decisions.
Stay Informed and Get Involved If you’re interested in learning more about the multifamily housing market or need assistance with your real estate investments, don’t hesitate to reach out. Our team is here to provide expert guidance and support to help you achieve your real estate goals. Contact us today to get started.
