The Canadian government’s housing target for 2030 is based on outdated and inaccurate population projections, according to a new report by CIBC.
The CIBC Capital Markets report, published Wednesday, reveals that the actual population of Canada is much higher than expected, mainly due to the influx of new permanent residents who have a higher demand for housing than the average.
CIBC estimates that the actual housing demand by 2030 will be at least five million units and not the 3.5 million projected by the Canadian Mortgage and Housing Corporation.
This means that the current housing supply is insufficient to meet the needs of a growing and diverse population, and the affordability crisis for home buyers and renters is unlikely to be resolved anytime soon.
Although the federal government has announced a cap on incoming international students, it’s very unlikely that it will address the issue at hand. Internal federal documents show that bureaucrats warned the government that its record immigration targets would strain the housing supply. The Liberal government has set a target of allowing 500,000 new immigrants to Canada per year.
The report cites data from Statistics Canada and the Canadian Mortgage and Housing Corporation, which projected that the Canadian population would reach 38.7 million by 2020. However, this was a significant underestimation.
In reality, there were 1.4 million more people than expected. Non-permanent residents accounted for more than 90% of that gap. And the gap has only widened since then.
The latest population projection from Statistics Canada, released in August 2022, was already 700,000 lower than the current population as of the end of Q2 2023.
The agency’s medium population forecast for 2030 was 42.8 million, while its high growth scenario was 44.15 million. Based on current trends, both scenarios are likely to fall short of reality by the end of the decade.
This means that the federal government’s target of building 3.5 million new housing units by 2030 is inadequate to address the housing shortage.
As per Canadian Mortgage and Housing Corporation data, there were only 240,267 housing starts in Canada last year.
The report also warns that the Canadian housing market is facing a severe downturn in 2024 due to high-interest rates, weak economic growth, and tight supply. Home sales and prices are expected to decline in the first half of the year, before recovering gradually in the second half as interest rates drop and pent-up demand returns.
However, this rebound will not be enough to improve affordability conditions, especially for first-time buyers who face high borrowing costs and poor availability of suitable housing options. The report says that it will take bigger rate cuts or deeper price drops to make a meaningful difference for buyers in expensive markets such as Vancouver and Toronto.