The Canadian Housing Market is About to Flip...
Summary
TLDRThe Canadian housing market faces significant challenges, with affordability remaining a major concern. Despite recent price corrections, rising interest rates, immigration, and limited housing supply continue to put pressure on the market. Building 3.5 million homes by 2030, as recommended by the Canadian Mortgage and Housing Corporation, seems unlikely due to insufficient housing starts. While interest rates are starting to drop, sparking potential demand, the supply shortage persists. The shift towards multifamily properties, like apartments, over single-family homes further complicates the future of affordable homeownership in Canada.
Takeaways
- 🏡 The Canadian housing market has remained challenging for prospective buyers despite recent price corrections.
- 📉 Rising interest rates and limited housing supply continue to drive affordability concerns for many Canadians.
- 🌍 Immigration plays a large role in increasing housing demand, contributing to rising rent and home prices, though the issue is complex.
- 🏘️ The Canadian Mortgage and Housing Corporation (CMHC) estimates that 3.5 million new homes need to be built by 2030 to restore housing affordability.
- 🔨 Meeting this goal of 500,000 homes per year is highly unlikely, with the highest historical housing starts reaching only 271,000 in 2021.
- 🏙️ The majority of new constructions are multi-family properties, such as apartments, which makes single-family homes scarcer and more expensive.
- 📊 Interest rates have been steady at 5% for the last two years, but recent cuts by the Bank of Canada may stimulate more demand from sidelined buyers.
- 💸 Although lower interest rates could increase purchasing power, many Canadians may still struggle with financial hardships and high monthly expenses.
- 🏗️ The future of Canadian housing is uncertain, with high demand, supply constraints, and economic factors making single-family homes increasingly rare and costly.
- 📈 The housing market could see renewed price increases due to lower interest rates and persistent demand, though it remains a difficult trend to predict.
Q & A
What are some of the main challenges currently facing the Canadian housing market?
-The Canadian housing market faces multiple challenges, including affordability concerns due to rising interest rates, limited housing supply, and socioeconomic impacts from the pandemic. Immigration, employment levels, and the cost of construction are also contributing factors.
Why is it difficult to implement one-size-fits-all housing policies across Canada?
-Canada is geographically vast with distinct housing markets in different provinces and municipalities. Each region has unique challenges, making it impossible to apply uniform housing policies effectively. Tailored solutions are needed to address each region's specific needs.
How has immigration contributed to the rising housing demand in Canada?
-Immigration has led to increased demand for housing, as the influx of new residents has intensified competition in the market, driving up rent and home prices. This is a basic economic principle of supply and demand, where a surge in demand and limited supply leads to higher prices.
How many homes does Canada need to build by 2030 to restore housing affordability?
-According to the Canadian Mortgage and Housing Corporation (CMHC), Canada needs to build roughly 3.5 million homes by 2030 to restore housing affordability. This is based on the percentage of household income required to purchase a home, aiming to bring housing costs in line with levels seen in 2004.
Is building 3.5 million homes by 2030 a realistic goal?
-No, building 3.5 million homes by 2030 is unlikely. Historical data shows that Canada has not come close to the required number of housing starts and completions needed. The highest number of starts in recent years was 271,000 in 2021, which is only about half of what is needed annually.
What types of housing construction have increased in recent years in Canada?
-Most new housing constructions in recent years have been multi-family properties such as apartments. In 2021, 70% of the 271,000 new housing starts were for multi-family units, which accommodate renters but do not address the long-term homeownership demand for single-family homes.
How have interest rates impacted the Canadian housing market?
-Higher interest rates have made it more expensive for builders to construct homes and for buyers to purchase them, which has slowed down the housing market. Recently, the Bank of Canada has lowered interest rates, which could increase buyers' purchasing power and potentially lead to higher demand.
What is the potential effect of further interest rate cuts on the housing market?
-Further interest rate cuts could trigger increased demand for homes as buyers gain more purchasing power. However, this could also lead to higher home prices, which may be unaffordable for many Canadians despite lower interest rates.
What kind of housing is expected to remain scarce and expensive in Canada?
-Single-family homes are expected to remain scarce and expensive due to the focus on building multi-family units like apartments. As the demand for long-term homes grows, the limited supply of single-family homes will continue to drive up their prices.
What are the long-term implications of building mostly multi-family units in Canada?
-While building multi-family units addresses the immediate need for affordable rentals, it limits the availability of long-term homes like single-family houses. As renters eventually seek to transition to homeownership, the scarcity of such homes could drive up prices further, exacerbating housing affordability issues in the long term.
Outlines
🏡 Canadian Housing Market: Challenges and Trends
This paragraph discusses the continued challenges in the Canadian housing market, highlighting affordability issues due to rising interest rates and limited supply. It notes that while home prices have corrected since the highs of 2022, buying a home remains difficult for many Canadians. Factors such as immigration, employment levels, and construction costs all contribute to the current housing crisis, creating a landscape where homeownership is increasingly out of reach for many. The geographic diversity of Canada's housing markets complicates the development of one-size-fits-all policies, as different provinces face distinct challenges.
📊 Immigration's Role in Rising Housing Prices
This section focuses on the complex role immigration plays in the Canadian housing market. While newcomers contribute to housing demand, leading to rising rents and home prices, the issue is multifaceted. The influx of immigrants has created additional competition in the housing market, particularly in major cities. Between 2018 and 2021, over 1.63 million new citizens arrived in Canada, with a large portion coming from India, the Philippines, and China. The government’s recent rollback of immigration policies, including the foreign worker program, is a response to growing concerns about housing affordability and other socioeconomic strains.
🏘️ Can 3.5 Million Homes Solve the Affordability Crisis?
Here, the script discusses the Canadian Mortgage and Housing Corporation's (CMHC) estimate that 3.5 million homes need to be built by 2030 to restore housing affordability. However, the possibility of reaching this goal is slim. Historical housing starts and completions have consistently fallen short, with the highest being 271,000 starts in 2021—far less than the 500,000 homes needed annually. Additionally, most new builds in recent years have been multi-family properties (apartments), which serve renters but limit the availability of single-family homes, further driving up prices for those looking to own a home in the future.
📉 Interest Rates and Housing Market Forecast
This paragraph explores how recent interest rate cuts by the Bank of Canada have the potential to revive housing demand. After holding steady at 5% for two years, the Bank of Canada recently lowered rates by 75 basis points, with more cuts expected through 2025. Lower interest rates could increase buying power, encouraging more sidelined buyers to reenter the market. However, while reduced rates may lead to a renewed increase in home prices, many Canadians may still struggle to afford homes due to rising financial hardships. The future of the housing market remains uncertain, with single-family homes likely to become even more expensive.
🎥 Conclusion and Call to Action
In the final paragraph, the speaker invites viewers to share their thoughts on the Canadian housing market, particularly regarding the recent interest rate cuts. They also promote their real estate and stock market content, including a free Skillshare course on stock market investing, which has gained significant popularity with nearly 3,000 students. The speaker thanks the audience for watching and encourages them to check out more content on the channel.
Mindmap
Keywords
💡Housing Affordability
💡Interest Rates
💡Housing Supply
💡Immigration
💡Multifamily Properties
💡Homeownership
💡Housing Starts
💡Pandemic Impact
💡Bank of Canada
💡Foreign Worker Program
Highlights
Despite price corrections, the Canadian housing market remains challenging due to rising interest rates and limited housing supply.
The Canadian housing market has been in a tough situation since the pandemic, creating long-lasting socioeconomic impacts.
Factors impacting the housing market include interest rates, immigration, supply and demand, employment levels, and construction costs.
Canada's housing markets are diverse, with unique challenges across provinces and municipalities, making one-size-fits-all policies difficult to implement.
Immigration is a major factor contributing to rising home and rent prices as increased demand outpaces housing supply.
Canada has welcomed 1.63 million new citizens since 2018, with a significant impact on housing market demand.
The Canadian Mortgage and Housing Corporation (CMHC) estimates that 3.5 million homes are needed by 2030 to restore housing affordability.
Housing affordability is measured by the percentage of household income required to purchase a home, with 2004 used as a benchmark for comparison.
The highest number of housing starts in recent years was 271,000 in 2021, far below the 500,000 homes per year required to meet the CMHC target.
70% of new construction in 2021 was for multi-family properties, such as apartments, which limits the availability of single-family homes.
The scarcity of single-family homes increases demand and prices, making homeownership harder for Canadians.
Interest rates have been stable at 5% for the past two years, but recent cuts by the Bank of Canada could revive the housing market.
Lower interest rates increase purchasing power, which may lead to increased demand and home price growth.
The Canadian government is retreating from open-border immigration policies, which were blamed for increasing housing costs.
Despite lower interest rates, Canadians may struggle with financial hardships, affecting their ability to bear rising home prices.
Transcripts
$667,500 ago in 2019 and despite having
come down quite a bit from the highs
reached in 2022 the housing market
remains challenging for many prospective
buyers where even with recent price
Corrections affordability remains a
significant concern as rising interest
rates and limited housing suppli
continue to put pressure on the market
the reality is that the Canadian housing
Market's been in a tough situation since
the pandemic hit the country by storm
creating longlasting socioeconomic
impacts on the Canadian economy with
multiple elements weighing in on the
future of housing in this country
interest rates immigration supply and
demand employment levels cost of
construction these are only a handful of
the issues that have turned Canada's
housing market from one that was
attainable and affordable to working
Canadians not 10 years ago to a market
with a bar set so high today that many
Canadians Now find home ownership
increasingly Out Of Reach creating a
housing landscape defined by
affordability challenges and growing
disparities let's talk about it all
right so one of the challenges with
Canadian housing from a federal
standpoint that's often overlooked is
just how vast the country is with
entirely unique housing markets across
different provinces and even individual
municipalities that operate all
independently of course and face
distinct challenges where this
geographical diversity makes it very
difficult to implement these one siiz
fits all policies in fact it's
impossible to do downright as each
region requires tailored solutions to
address its specific housing needs and
market dynamics that being said Canada
has roughly 10 main housing markets
spread out across most of the provinces
with each of these cities facing
different challenges to tackle their own
housing issues however the main issues
remain permitting and construction
timelines in parallel with increased
demand pressures that tend to permeate
across all of these major markets alike
now while it may be tempting to blame
newcomers for driving up housing demand
the issue is of course more complex than
what initially meets the eye however
immigration is undeniably a large Factor
contributing to Rising rent prices
and home prices as an influx of new
residents has led to increased
competition in the housing market that
is just a fact and this surge in demand
combined with limited Supply inevitably
drives prices higher a basic principle
of Economics that I learned in my
freshman year of University in fact
although a difficult topic to discuss
over the past several years as talking
about it puts you in Social hot water
for some reason well I've continued to
discuss this situation on the channel
and now a couple of years later once a
lot of damage has already been done
unfortunately lo and behold the Canadian
government is retreating from its stance
on open border immigration policies by
rolling back Canada's foreign worker
program which for the record has been
recognized for aiding Canada's recovery
from the pandemic but has also been
increasingly blamed for contributing to
housing costs strain on the Health Care
system and Rising youth unemployment and
to put this into perspective since
January 2018 Canada has welcomed 1.63
million new citizens with nearly a third
coming from India the Philippines or
China and in 2021 migrants as a whole
made up over 8.3 million people in the
country accounting for almost a quarter
of Canada's population which is
undeniable data towards the housing
market supply issues so let's talk about
that a little bit more the C MC or
Canadian mortgage and housing
Corporation has stated that considering
the current state of the Canadian
housing market we would need to build
roughly 3.5 million homes in order to
regain housing affordability by 2030 now
what does it mean to restore housing
affordability by 2030 though well the CC
defines this by the percentage of
household income required to purchase a
home quite simply where affordable
housing means a much smaller share of
income would be needed whereas
unaffordable housing Demands a larger
portion of most individuals take home
pay and the goal is to bring housing
costs down to a level that is more in
line with what they were in
2004 almost 20 years ago which was way
before prices began to soar in the first
place and to give you some visual
context back in 204 here's what home
prices to income looked like where these
two values mostly grew at parallel
before house prices went parabolic
relative to income after around 2005 and
even much worse of course after the
recent pandemic but the question is is
building 3.5 million homes by 2030 even
in the realm of possibilities well the
short answer is no but to provide some
additional context this report had come
out back in 2022 meaning 7 years through
to 2030 so 3.5 million homes means 500
,000 homes per year and if we look at
historical home values we can see that
we've been nowhere near the required
amount of housing starts and completions
for that matter to achieve the CC's
required number of homes by 2030 for
that restored affordability in fact the
highest level of starts that we've seen
in recent years has been 271,000 in 2021
which is half roughly the amount needed
per year to restore that affordability
according to the cmhc and that's even
despite seeing 337,000
completions that year with values having
come down as higher interest rates make
it just more expensive for Builders to
build homes now what's also interesting
to look at is the types of constructions
that are being built up which gives us a
picture of how the Canadian housing
market has evolved to accommodate such a
rapid spike in population relative to
current population size so in 2021 of
the 271,000 new housing
starts
189,000 were for multiples meaning
multif Family Properties essentially so
this means that 70% of new construction
in Canada are Apartments essentially
designed for renters which isn't a bad
thing for the current problem at hand
but limits the amount of actual homes or
long-term homes I guess we could call
them in the country thus making single
family semi- detached homes and even row
homes that much more scarce and in
demand thus driving out prices further
in the future when renters inevitably
want to move out of their apartments and
into longer term homes so let's talk
about how the housing market could play
out in the shorter term though so as it
stands right now sales volume has been
steady across the country for roughly 2
years ranging between 35 , and 40,000
transactions per month and this is
despite average sold prices having
varied quite a bit but increased in that
same time frame nonetheless now in
parallel to this interest rates remained
steady at 5% for most of these past 2
years having now come down by 75 basis
points as of this week it just came out
this week that the Bank of Canada
lowered interest rates by 25 basis
points as expected and this is with the
Bank of Canada very much being expected
to continue cutting rates further at
every rate meeting through to 2025 as
inflation has come down quite
dramatically and the Canadian economy
needs a boost that lower rates would
bring however lower interest rates also
means increased purchasing power for
buyers once again which as we've seen
previously the data shows that sidelined
buyers are still very much eager to buy
but have just been waiting for rates to
drop to make monthly payments more
affordable when making a purchase so
although the 75 basis point drop to date
hasn't done all too much to revive the
market well another 25 another 50 basis
points by 2025 could very well be that
further Catalyst needed for a larger
portion of the population deciding to
jump back into the buyer pool sparking
an increase in demand for homes once
more that said although economic
principles Point towards a renewed
increase in home prices I'm not sure the
Canadian population would really be able
to Bear increased home prices even
further and that's despite lower
interest rates as Canadians are
increasingly faced with financial
hardships to pay for monthly expenses
quite simply so all of this to say in
the face of upcoming rate cuts and
continued strong demand for housing in
Canada the future of Canadian housing
remains a difficult one to predict as
there are so many factors impacting both
supply and demand what is certain though
is that single family homes are and will
continue to become even more of a rare
and expensive commodity to own on
Canadian soil While most metropolitan
areas continue to become densified with
multif family properties and apartment
buildings so what are your thoughts on
the Canadian housing market considering
that we're now in a period seeing
interest rates starting to drop as we've
spoken about and predicted for a while
now on the channel that that would
happen
right about now in the second half of
2024 make sure to leave a comment down
below and if you want to learn more
about real estate investing or homes in
general in Canada make sure to check out
the other content that I have on my
channel as well as checking out my stock
market investing course over on
skillshare that is completely free for
you to watch it has over 7 and 1/2 hours
of content and nearly 3,000 students on
there which is absolutely insane but you
can check that out using the link Down
Below in this video's description so
with that said thanks a lot for watching
and I'll see you in the next one
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