Challenges set to continue for most of 2024
The latest housing outlook from Desjardins reveals that Canadians shouldn't expect housing affordability to bounce back to pre-pandemic levels anytime soon, not within the next two years at least. This forecast persists amid predictions of a mild recession and potential dips in interest rates that might otherwise dampen home-buying activity.
Desjardins principal economist Marc Desormeaux pointed out: “It’s important to highlight that while periods of softer economic activity do tend to result in weaker home price growth, they also mean poor income growth. Moreover, while we expect mortgage rates to come down from current levels over the next two years, they won’t likely reach the rock-bottom levels of the pandemic or the early 2010s.”
According to the report, lower interest rates expected later this year could entice buyers back into the market, especially in sensitive areas like Toronto and Vancouver. However, this anticipated activity is expected to spark a broad-based rebound in home prices by the second half of 2024, extending into 2025, despite the continuing challenges of high interest rates, a constrained housing supply, and surging population growth pushing prices and rents higher.
Desormeaux also highlighted a significant slowdown in residential construction activity, in large part due to labour shortages, dwindling homebuilder confidence, and the persistently high costs of interest rates and building.
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Meanwhile, Benjamin Tal from CIBC also weighed in on the government's efforts to address the housing affordability crisis, pointing out that recent measures, including restrictions on the number of foreign students, while well-intentioned, fall short of addressing the core issues. He emphasized that the discrepancy between the planned housing supply and actual population growth is a crucial planning issue that needs to be addressed to improve housing affordability.
Tal's projections indicate that to achieve affordability by 2030, Canada would need approximately five million new housing units, far surpassing the 3.5 million units estimated by CMHC in 2022. This gap underscores the intricate challenges Canada faces in addressing housing market affordability, from policy and economic factors to planning and construction hurdles.
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