London’s boom in housing starts will begin to slow down this year, in part because of decreased demand in the rental market. That’s according to a new forecast by the Canada Mortgage and Housing Corporation.
The prediction follows years of growth in the new housing sector, and a tight rental market for those looking for a place to hang their hat.
“It’s very hard,” said renter Liharika Doli. “When we started searching in London to look for houses, it took for instance two months for us to get an apartment. We had to come every weekend here, search for a house,” she explained.
It may be about to get a little easier.
According to the new Housing Market Outlook from CMHC, the vacancy rate is expected to rise as new-build apartment buildings are completed.
Lower migration to London will also discourage housing starts, said CMHC economist Anthony Passarelli.
“Rental demand is slowing down a bit - particularly because of the international student cap. So, builders who’ve already got a lot of projects on the go, they’re going to complete them to see how they get leased up, then maybe wait a bit to start new ones,” he said.
According to the Market Outlook, the vacancy rate for rentals will jump slightly from 2.9 per cent in 2024 to a projected 3.2 per cent in 2025. Rent is also expected to rise from an average of $1,548 to $1,609 for a two-bedroom apartment.
“Ten years back maybe it was $800 or $1,000 for a two-bedroom apartment. Now we have to go around like $1,800 to $2,000,” said Liharika Doli.
The CMHC says sales of existing homes will continue to increase over the next couple of years, as will prices. But that could all be tempered by the great unknown - the economic threats coming from south of the border.
“There’s definitely a lot of risk right now on the negative side, a lot of uncertainty,” said Passarelli. “It really depends on how long this plays out for, right? At this moment in time, we’ve put out a forecast with a range of possibilities,” he said.
According to the projections, sales of existing homes are expected to increase, but only slightly, from an estimate of 8,100 in 2024 based on MLS sales, to between 8,100 and 8,900 this year.
The average sale price will go from $642,000 in 2024 to between $649,000 and $699,000 in 2025.
In the meantime, new home starts are expected to drop from 4,171 in 2024 to between 2,550 and 3,250 in 2025.
