What's going on with housing in Canada?
How the price of building a house affects its price.
Earlier we wrote about the housing problem in Canada being discussed very seriously. It is getting harder and harder to rent or buy a house or even an apartment, regardless of the city or region.
Justin Trudeau's opposition Conservative Party chief Pierre Poilievre tweets at least once a week that rent prices have risen several times during the Trudeau administration and he gives disappointing figures.
The C.D. Howe Institute recently presented a report comparing two metrics: housing prices and construction costs. And here's what the researchers are getting at: over-regulation is causing prices to far exceed the cost of building new homes. This gap should not exist or even be small, but in Canada it exists.
It was estimated that the price of a home for a family in Vancouver was CAD 1.3 million more than the cost of producing the same home in the same market, where there are no excessive regulatory barriers. In Toronto, the gap was CAD 350,000. To put it simply, single-family home prices in Vancouver were 60% higher than the cost of building such homes.
“Any difference between the cost of (new housing) supply and the market price, especially over a decade’s worth of data, is likely due to persistent restrictions on access to new land,” Benjamin Dachis, the report’s author, said.
The rate of new housing construction is not getting faster because of the lack of appropriate land for it and this in turn leads to an imbalance between supply and demand.
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