Canada Needs 3.5 Million More Homes By 2030 To Cut Housing Costs
According to a new report from the Canada Mortgage and Housing Corporation, Canada needs to build 3.5 million more homes by 2030 in order to bring housing costs down as the population grows. The report shows that Ontario and British Columbia make up the largest portion of the housing supply gap. 60% of the 3.5 million more homes are allocated to Ontario and British Columbia, as both provinces have the least affordable housing markets largely because housing supply has not kept up with demand over the past twenty years in most major urban centres. Alberta and Quebec are projected to have higher economic growth compared to other provinces in the coming years, causing supply gaps to worsen. Canada is on track to build 18.6 million homes by 2030. In order to achieve housing affordability for Canadians, approximately 22 million homes need to be built by 2030. As the numbers currently stand, there is a shortfall of 3.5 million new homes. The latest 18.6 million new home projection is trending down, the main reason being the decline in housing construction. Rising labour costs and higher material costs are contributing significantly to the slowdown in new home construction. As interest rates rise and borrowing conditions tighten, builders and developers are having increased trouble securing credit to fund construction. Along with the overall slower real estate market, many developers are holding off on building since their profit margins are becoming slimmer. Many new home developments have been delayed or cancelled altogether. The Canada Mortgage and Housing Corporation measures how affordable housing is by comparing housing costs as a ratio to income. Canada has never seen the cost for housing this disproportionately higher than current income levels. CMHC's goal is to bring housing costs down to match the 2003-04 cost-to-income ratio, when the economy was considered more stable and housing costs were lower relative to income.
Inflation Rate Plunges: Are Canadians Finally Seeing Financial Relief?
After record inflation numbers over the past year, Canadians are finally seeing some financial relief, as the latest inflation reports suggest. Canada's annual inflation rate dropped to 2.8% in June, bringing yearly price growth within the Bank of Canada's target range of 1% to 3%. This drop is largely due to falling gas prices across Canada. Statistics Canada reported that the Consumer Price Index (CPI) dropped more than expected in June. The Consumer Price Index tallies several key measures of inflation, including food costs, housing, gas, and the cost of other common goods. Despite the recent drop in inflation, food prices remain remarkably high; 9.1% higher than the same time last year. A large contributor to Canada's high year-over-year inflation numbers are mortgage interest costs. The cost to borrow is up 30.1% compared to June 2022. Excluding mortgage interest costs, Canada's inflation rate would sit at only 2%. This is the exact inflation rate that the Bank of Canada is hoping to achieve. On the other hand, falling gas prices have brought inflation numbers down considerably. Without factoring in the cost of gas, Canada's inflation rate would be 4% on a year-over-year basis. The Bank of Canada will likely see this news as a step in the right direction. These findings suggest that the most recent interest rate hikes are creating the intended effect on the Canadian economy. After inflation hit a 39 year high in June 2022 of 8.1%, and the Bank of Canada raised interest rates a total of 475 basis points since March 2022 in an effort to curb inflation, the latest reports are good news for Canadians.
June 2023 Market Update
The amount of home sales in the Greater Toronto Area in June 2023 remained above last year's levels, but were down on a month-over-month basis. Selling prices have remained steady, or have increased in certain areas, from May 2023 to June 2023. The demand for home ownership is greater now compared to last year, despite higher borrowing costs. However, uncertainty regarding interest rates and the Bank of Canada's inflation outlook has contributed to the slowdown in sales in June 2023. The persistent lack of inventory of homes for sale most likely sidelined some buyers, which in turn results in less sales activity. Simply put, buyers cannot buy what is not available. The Greater Toronto Area saw a 16.5% increase in the amount of sales in June on a year-over-year basis, and a 3% decrease in the number of listings over the same period. The increase in sales and decrease in listings this past June ment that market conditions were tighter compared to June 2022. On the other hand, selling prices are down 1.9% on a year-over-year basis. This is the lowest annual rate of decline in selling prices this year, meaning prices are trending upwards. The Bank of Canada's position on inflation and interest rates for the remainder of the year will play a key role in determining how sales and prices are affected in the coming months. To see how prices have been affected in your area, please click the link below to get access to TRREB's June Market Statistics for all areas in the GTA. The stats are broken down by average sales price, number of homes sold, number of new listings, and average days on market for each property type; detached, semi-detached, townhouses, and condos. https://trreb.ca/files/market-stats/market-watch/mw2306.pdf If you want to know more about what is happening in your specific area, you can book a call with me by clicking the link below. https://calendly.com/davidrizzuto/consultation-call?back=1&month=2023-07
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