Canada's Housing Crisis: A Consequence of Aggressive Immigration Policy
Story by Investing.com
By Ketki Saxena
Investing.com
- The Trudeau government has taken a perplexing approach to tackling
the ongoing housing affordability crisis in Canada. By implementing the
most aggressive pro-immigration policy in history, they have intensified
the demand-supply imbalance within the country. Consequently,
population growth continues to soar, with Canada experiencing its
highest ever annual growth rate at 2.7 per cent – an increase of more
than a million people – last year.
As per David Rosenberg of Rosenberg Research, this strategy is nothing short of bewildering.
Rosenberg
notes that the crux of the issue lies in Canada's inadequate supply,
particularly for residential real estate, which cannot accommodate such
immigration-driven population growth without further straining an
already-overburdened housing market. The ratio of population to housing
stock now stands at 40 per cent above historical norms, as does
homeowner affordability ratio.
Ballooning
debt remains necessary for many Canadians seeking home ownership;
consequently pushing household balance sheets into precarious territory
with a record-high debt/income ratio at 180 per cent. Over 14 per cent
of incomes are now consumed by escalating debt-service costs while tight
labour markets and growing earnings fail to offset higher rates and
persistent exorbitant home prices, which are once again trending
upwards.
With
further rate hikes by the BoC seeming unlikely, Rosenberg believes that
the only way to improve affordability for Canadians is for the Canada
Mortgage and Housing Corp. to tighten lending guidelines.
Rosenberg
exhorts Ottawa to seriously contemplate adopting a less-ambitious
immigration policy as its current approach causes more harm than good. A
nation where individuals in their 30s face exclusion from the housing
market due to prolonged periods of excessive home price inflation – a
direct result of government policy – is far from content. This
discontent may manifest itself in the upcoming elections, providing
ammunition for opposition parties.
Rosenberg
is no less stringent in his criticism of Prime Minister Justin Trudeau,
who he believes has facilitated some of the most burdensome housing
affordability conditions ever encountered in Canada; and that this has
had widespread negative implications on society as a whole.
To
illustrate just how dire this situation is, he points out that
homeowner affordability would need to witness an almost 30 per cent drop
in home prices merely to revert back to its long-term average. However,
such natural correction remains unattainable due to governmental
immigration policies that maintain absurdly high price levels. Interest
rates would have to plummet nearly two percentage points or incomes
surge by 40 per cent instead.
The
bottom line? Rosenberg notes that this precarious scenario cannot
persist indefinitely; with little likelihood that income will increase
by 40 per cent anytime soon, what's needed is for the BoC to facilitate
lower rates while implementing fiscal and regulatory policies fostering
reasonable home prices (regrettably at existing homeowners' expense) and
sustainable low inflation (currently hindered by Ottawa’s spending and
immigration strategies).
https://www.msn.com/en-us/money/realestate/canada-s-housing-crisis-a-consequence-of-aggressive-immigration-policy/ar-AA1aI6Fd