The chief economist of Desjardins Group, Jimmy Jean, has bad news. Speaking recently, he declared that Canada can’t build enough homes fast enough. The goal? To solve the housing affordability crisis within seven years.
This warning came at a Toronto event. It was organized by the Economic Club of Canada on September 12. Jimmy Jean compared the current situation to the past. He stated it took Canada 30 years to build 5.8 million homes.
Soft Market, Hard Challenges
We’re seeing a shift in the market. It’s becoming softer, favoring buyers more than before. However, there’s a catch. Although house prices are lower, other costs have gone up. Interest rates have risen. This has made monthly payments more expensive.
If you own a home, this is good for you. Your property value will likely stay stable. But for buyers, the market is still tough.
Realistic Expectations and Timelines
Jean brought up an alarming point. He questioned the feasibility of building millions of homes in just seven years. “You can’t squeeze 30 years of construction into seven years,” he told the crowd.
Last year, Canada Mortgage and Housing Corp. (CMHC) had a projection. They said Canada would need 5.8 million new homes by 2030. This would make housing more affordable. To meet this, 3.5 million additional homes would have to be built.
The agency revised these numbers on September 13. They lowered the projected number of homes to be built by 2030. Yet, the supply gap remains nearly the same, around 3.5 million homes.
Immigration and Housing
The federal government has plans too. They aim to admit 500,000 permanent residents annually by 2025. They believe this will fix labor shortages. However, Jean raises a question: Can the housing supply keep up?
Interest Rates and Impact
On September 6, the Bank of Canada kept its benchmark interest rate at five percent. This has offered some relief to the housing sector. Yet, the raised rates are affecting new home financing. Investors are becoming hesitant.
Dawn Desjardins, another economist, said something interesting. We’re 18 months into the rate hikes. The full impact is starting to show. She predicts lower interest rates might return by 2024.
Policy Suggestions
- A mortgage deductibility program should be considered. This would aim to help people affected by high-interest rates. It would lower their monthly payments and let them build financial equity.
- A special mortgage rate for first-time buyers should be introduced. It should start 200-400 basis points below current rates. Over 5-15 years, it should then rise to current rates. The aim? To help first-time buyers and stabilize the market.
FAQs
Q: How long will it realistically take to solve the housing crisis according to experts?
A: According to Jimmy Jean, chief economist at Desjardins Group, it could take up to 30 years.
Q: What are the federal government’s plans for immigration?
A: The plan is to bring in 500,000 permanent residents annually by 2025.
Q: Are interest rates expected to go down?
A: Dawn Desjardins predicts that interest rates may decrease by 2024.
Q: What policy changes are suggested to alleviate the housing crisis?
A: Two key suggestions are a mortgage deductibility program and a special mortgage rate for first-time buyers.
