The proportion of household income needed to service the costs of a single-family home grew to 53.5 per cent in the first quarter of 2018, according to a report released Wednesday.
And that is one reason Canadians, especially millennials, are abandoning their dream of ever owning housing in the city and and are now looking to the suburbs or other markets for more affordable housing, the 2019 Emerging Trends in Real Estate report from PwC Canada and the Urban Land Institute concluded.
According to the report, the real estate sector is also carefully monitoring recent tariff negotiations around steel, and rising interest rates, which could further exacerbate the cost of housing, and land supply.
Land supply, in fact, is the top development concern heading into 2019 and the report said that all levels of government need to increase their focus on the supply side of the issue, not just demand.
“Dealing with the affordability issue is a shared responsibility between government and developers. While government addressed demand by introducing measures like tighter mortgage rules and foreign taxes, they neglected the supply side,” said Frank Magliocco, national real estate leader for PwC Canada. “Reducing regulation and making more land available for development in a timely manner will help address the affordability issue.”
Richard Joy, executive director of Urban Land Institute Toronto, said the real estate industry is at a crossroads where it needs to work with many other sectors in order to thrive in the future.
“We’re seeing more and more collaboration between architects, construction companies and the technology sector working to redefine how Canadians live,” he said.
“Rising interest rates and higher tariffs on foreign steel are top of mind for developers and owners. For example, tariffs on steel could translate into more expensive input costs for residential and commercial builders, ultimately putting further pressure on affordability.”
The report also said coworking spaces or flex office space continue to see an upward trend and are forecasted to make up 30 per cent of corporate real estate portfolios by 2030.
“Creating a coworking space isn’t so much about cost as it is building a community and sharing experiences and knowledge between different people and industries,” said Magliocco.
The report also said:
- the multi-family apartment sector continues to be a strong performer;
- segments of the retail sector continue to struggle and are forced to reinvent themselves;
- the industrial sector continues to perform well and with Canada’s legalization of recreational cannabis is set to provide opportunities across the country as emerging companies look to find industrial space to grow the plant and retail space to sell product;
- senior lifestyle housing is among the top development prospects for the next year since Canadians over the age of 65 have surpassed those under the age of 15. In 2017, 31 per cent of Canadians aged 85 and older lived in collective dwellings, which will only grow in upcoming years.
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.