The market is eagerly compensating for its pandemic-era stoppage, says nesto economist
With the Canadian housing market recovering in earnest from its pandemic-era doldrums, the rest of 2023 will see the constant presence of high levels of demand – levels sufficient to have an impact on overall costs, according to Francis Gosselin, consulting economist at nesto.
“Supply is a bit short, and people need to live somewhere, so demand is kind of constant,” Gosselin told Canadian Mortgage Professional in recent months. “We’re kind of catching up from the pandemic in terms of immigration.”
The latter trend is particularly crucial, given that the federal government has set the immigration target to 500,000 new arrivals annually by 2025.
Housing Minister Sean Fraser has stood by the importance of these new additions to the economy, describing the suggestions of a blanket ban on immigrant purchases of Canadian homes as “wrongheaded”.
“I would urge caution to anyone who believes the answer to our housing challenges is to close the door on newcomers,” Fraser said. “There are no simple solutions, but if we continue to advance measures that help build more stock, that help make sure it’s easier for people to get into the market and make sure we’re offering protections for low-income families, particularly in vulnerable renting situations, we’re going to be able to make a meaningful difference.”
Aled ab Iorwerth, Deputy Chief Economist at CMHC, voiced concerns about housing supply challenges in Canada, citing difficulties in accessing capital and higher #interestrates affecting #housingstarts in 2023.— Canadian Mortgage Professional Magazine (@CMPmagazine) September 28, 2023
However, the Bank of Canada’s high policy rate might prove to be a moderating factor in housing demand, Gosselin said.
“Even though rates have not decreased, people are kind of betting on it,” he said. “There will be a kind of timing strategy – ‘I’m going to buy now, and the [rates] are eventually going to come down.’”
At the same time, Gosselin believes that Canadian households have by and large gotten used to elevated prices, with most of their spending already factoring in the higher interest rates.
Watch now: What’s next for the Canadian economy?