In Brian Yu’s article “Gimme Shelter,” featured in today’s edition of The Globe & Mail, he delves into the current trends and future outlook of Canada’s housing market. Despite a respectable level of housing starts, about 250,000 units annually, this rate falls short of meeting the increasing demands of Canada’s growing population. Surprisingly, the number of new constructions has remained resilient, even amidst a sharp decrease in resale activities, primarily due to soaring mortgage rates.
Looking ahead to 2024, Yu predicts a notable decline in construction activities, especially in urban areas of British Columbia, which have already experienced a 7% decrease. This downturn is particularly significant in the single-family home sector, showing a 28% drop, while multifamily buildings have maintained stability, thanks to decisions made in more favorable market conditions in the past.
Yu also critiques government policies such as GST exemptions and investments in affordable housing. He argues that while these policies are designed to increase housing supply, they might not sufficiently address the current market weaknesses and financing hurdles. Canada, with its continually expanding population, is likely to face intensifying housing supply challenges in the short term.
The article further explores how this decrease in construction activity could impact inflation, particularly the shelter index. As construction slows down, rental prices are likely to escalate, and high home prices may persist, thereby impacting overall affordability.
To sum up, while Canada’s housing construction currently demonstrates resilience, Yu points out the looming challenges and a potential downturn. These issues are expected to have lasting effects on both the housing market and the broader economy.
For a more detailed analysis, including charts and expert predictions on housing, immigration, interest rates, and more, you can access the full article in The Globe & Mail (a subscription may be required).
https://www.theglobeandmail.com/business/article-charts-canada-economy-2024/