The crisis to come?

Quietly, today, one of China’s biggest corporate corpses will be buried. Some people wonder if Canada is on the same trajectory. If so, we may have only seen the tip of our housing crisis iceberg.

China Evergrande, recently the world’s heftiest real estate development outfit, is being punted from the Hong Kong stock exchange as liquidators pick over its massively indebted, complicated, emaciated skeleton. The company failed with a staggering $300 billion in debt (that’s three hundred times a thousand million).

Evergrande leaves – uncompleted – over 1,300 projects in 280 cities which hundreds of thousands of buyers paid for, and will likely receive nothing. Corporate assets have been squandered, stolen, raided and devalued. Creditors – from major banks to governments and large investors in London, New York, Toronto and Vancouver – will be SOL. The company’s failure took China’s massive economy to the brink. The social impact could last generations.

This is what happens when a country tries to build an economy on real estate. Private residential ownership excited Chinese, who were encouraged by cheap loans and government support to jump into ownership. In just sixteen years Evergrande went from nothing to spectacular heights, a market cap of $50 billion, millions of built units and spinoffs in EVs, wealth management and professional sports.

Then the housing market turned. Cheap money fizzled. Covid happened. Poof.

So what about us? Are there echoes here?

It sure looks that way as Canada’s real estate development and construction business falls to its knees in pain and submission. “We are in the midst of a worsening housing crisis, and our industry, one of the country’s largest employers and economic engines, is under historic pressure,” says a new industry group representing Toronto, Vancouver and 50% of all the builders in Canada. “We need immediate federal action to address the cost-of-delivery crisis, unlock capital, protect jobs, and keep housing delivery moving in our largest cities.”

Exaggeration? Not really. In the GTA alone there are now 41,000 jobs and $6 billion in annual tax revenue at stake.

The stats speak for themselves. In the Toronto region, the latest report shows just over 500 new units sold in a month in a market off six million people. That’s 60% below year-ago levels (which were a disaster) and 82% under the long-term average. Condo sales have slagged 67% and single-family home deals are off 57%.

Government handouts, first-time buyer incentives, tax holidays and lower mortgage rates – they’ve all failed. “At a time when residential construction should be accelerating, the industry has come to a virtual standstill,” says the boss at Mattamy Homes.

Unsold inventory continues to stack up at an historic pace. There are 22,254 units, of which 16,696 are condos, available. It’s enough to satisfy the market until the spring of 2027 without another unit being built. And if that were to happen, in that year Canadians could expect a massive real estate shortage and prices soaring as they did during the pandemic.

Already the situation is untenable, says Mike Moffat, an academic and founder of the Missing Middle Initiative. “Housing starts and sales are falling in some of Canada’s largest cities, as the cost of building homes makes homebuilding unviable,” he says.

He’s joined major Canadian builders in forming the Large Urban Centre Alliance – a group representing over 50% of all housing starts, now pressuring the Carmey government to save them from becoming Canada Evergrande. They say…

The risks of inaction are real and growing. New home sales in the Greater Toronto Area have all but evaporated. Relative to the first quarter of 2022, new and pre-construction home sales in the first quarter of 2025 were down 89% in the Greater Toronto Area, 77% in the Greater Vancouver Area, and 51% in the Ottawa Region. Given the lag between new home sales and housing starts, new home construction is expected to remain exceptionally low in these three markets for the foreseeable future.

What do they want?

The two major asks for the October federal budget are to (1) drop HST for three years on houses up to $1.5 million, and (2) trash the foreign buyer ban allowing investors to buy new construction (as in Australia) and also rid new rental construction of HST. (You may recall that BC developers also asked for the ban to be ended. The province refsed.)

Finally, why has this happened?

“Consumers are lacking the confidence to enter into one of their largest purchases as the economic uncertainty centered largely on U.S. tariff policies weighs heavily on potential homebuyers,” says industry research. Sales have stalled out. Projects are being cancelled. Trades are being idled. And yet prices haven’t budged much since the cost of land has not fallen input costs have risen. Builders, simply, cannot build what purchasers can afford. So the building and the buying have ceased.

It’s a tale of two markets. There are reasons to believe resale housing may revivsomewhat in coming months, while the builders go paws-up. But it is in development and construction that true economic activity occurs, as armies of workers create homes for a growing population.

Apparently you can’t build an economy out of selling each other condos. Who knew?

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Source: https://www.greaterfool.ca/2025/08/25/the-crisis-to-come/