In the article “Gimme Shelter” by Brian Yu, Chief Economist at Central 1, in today’s edition of The Globe & Mail, the current state and future of Canada’s housing market is examined. Despite a steady pace of housing starts, with around 250,000 units being built annually, this is still insufficient to keep up with the growing population demands. The resilience in housing starts is somewhat surprising, given the sharp decline in resales due to high mortgage rates.
However, Yu anticipates a significant downturn in construction in 2024. Urban area starts, particularly in British Columbia, have already seen a 7% decrease. This downturn is more pronounced in single-family homes, which have declined by 28%, whereas multifamily buildings remain stable. This stability is attributed to decisions made several years ago when the market was more favorable.
Yu also addresses the impact of government policies like GST exemptions and investments in affordable housing. While these policies aim to boost housing supply, they are unlikely to counterbalance the market’s weakness and financing challenges. With a continuously growing population, Canada faces worsening housing supply issues in the near term.
Finally, the article touches on the implications for inflation. As construction declines, the pressure on the shelter index is likely to increase. This situation will drive rents higher and maintain high home prices, affecting overall affordability.
In summary, while there is current resilience in Canada’s housing construction, significant challenges and a potential downturn loom on the horizon, with lasting effects on both the housing market and the broader economy.
Here is a link to the full article that includes charts and predictions by numerous experts in their field on the topics of housing, immigration, interest rates and more (you may need a subscription to The Globe & Mail to access the article).
https://www.theglobeandmail.com/business/article-charts-canada-economy-2024/