Canada’s two most expensive cities for housing are not building enough new homes , and that is driving people to Edmonton , according to the deputy chief economist of Canada Mortgage and Housing Corp . Aled ab Iorwerth said data already shows an influx of people moving

from Vancouver and Toronto to the Alberta capital, and it’s only going to get worse if more supply isn’t created in the two cities that regularly clock in as Canada’s priciest.

“It’s already happening,” said ab Iorwerth, in an interview with the Financial Post following a presentation at the Veritas Great Canadian Real Estate Conference this week.

CMHC said the Toronto region had a housing stock of approximately 2.5 million homes in the third quarter of 2024, but would need just over three million homes by the fourth quarter of 2035 to maintain current affordability levels. Vancouver’s stock of 1.1 million homes would need to rise by 24 per cent during that period just to keep pace with the current population,

without even attacking affordability . “Edmonton and Calgary are relatively more affordable, and if Vancouver doesn’t increase its housing supply, people will move,” said Iorwerth.

The average sale prices in the Toronto region fell about four per cent in September from a year ago but still checked in at $1,077,602 last month, according to the local real estate board. Vancouver is still the country’s most expensive city with a benchmark price of $1,142,100 in September, down 3.2 per cent from a year ago.

In Alberta’s capital, the average sale price was up 2.8 per cent from a year ago but still only $452,849.

Even in more affordable cities such as Montreal, where the median price for an existing home was up seven per cent in September from a year ago but still only $632,500, the economist predicts that the lack of new construction will drive people out.

“You have a challenge even with Quebec that if Montreal doesn’t increase its housing supply, people will move to places like Trois-Rivières and Quebec City,” said ab Iorwerth. “It’s concerning because my view is people should be moving to where there are the job opportunities and where there are better careers. They should not be basing decisions where they live on housing costs.”

In Vancouver and Toronto, the economist noted that the regulatory burden, including issues such as approval delays and land use reviews, is high enough to create challenges for construction.

“On top of that, development fees are quite high,” the economist said.

A study from CMHC found Toronto led the country in development charges, while Vancouver was second.

Government charges can account for more than 20 per cent of the construction costs of a dwelling unit in some major Canadian cities. In the country’s largest city, the Crown Corp. has said prices could be up to 24 per cent lower without the fees.

The economist noted that affordability challenges exist across the country and can be alleviated with more supply across Canada.

“If we want to reset the affordability in Toronto and Vancouver, we need dramatically more housing supply,” he said during his presentation. “People are starting to move because of house prices. Edmonton does not need to build more housing than it plans to build, but if Vancouver and Toronto don’t get their act together, Edmonton will have to build a lot more housing because people will leave Toronto and Vancouver.”

ab Iorwerth also said the job market could become a pressing issue for Canadians with housing debt, and stressed that CMHC is closely watching the two million mortgages being refinanced in the next two years

“This is because everybody was taking five-year mortgages in 2020 and 2021, and they are now coming up for renewal, and they will obviously be at higher rates,” he said. “There is one silver lining, that the interest rates are lower than a year ago.”

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