Here’s what’s new this week in the real estate and mortgage world this week in September.

This week’s news

  • While some headlines are warning of a “bubble” in the housing market, analysts aren’t predicting a crash.
  • The federal government has been ramping up new measures to increase the supply of new housing.
  • In the latest report from the CHMC the rate of new builds was flat across the board in August.

Is the Canadian housing market a bubble?

With affordability remaining a top issue for Canadians and interest rates on the rise over the past year, some have been calling for the bubble to burst, predicting an imminent crash in the price of housing. Whether this is wishful thinking or a case of schadenfreude it doesn’t seem likely given the recent reports put out by analysts knowledgeable on the market. In a recent report the CMHC highlighted a 3 million unit gap that needs to be filled by 2030 if the market is to achieve affordability within the next 10 years. The latest report brings their projected supply forecast down by 400,000 units stating “An important reason for this decline is the current shortfall in housing construction.”

Similarly a recent report put out by TD bank took a look at the effect of population growth on the housing market, coming to the conclusion that “housing supply will struggle to keep pace with Canada’s rapidly expanding population” and “A meaningful improvement in affordability will likely remain elusive.”

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Most predictions of a crash rely on increasing interest rates to force homeowners to sell on mass as they become unable to afford their mortgages. In our own analysis on the matter, we found that the number of homeowners late on their payments as of Summer 2023 were still well below the rates we’d need to see before foreclosures started becoming a common enough phenomenon to make a significant impact in the price of homes.

Recommended reading: The Canadian housing market isn’t a bubble

The federal government announces a number of new measures to increase new supply

The federal government has introduced a number of measures in an effort to ease Canadians’ concerns about housing affordability. First of which was the Enhanced GST Rental Rebate which increases the GST rebate on purpose-built long-term rental properties from 36% to 100%, giving investors more incentive to build long-term rental properties which are typically more dense than other types of properties. The government also announced grants for specific municipalities with London Ontario receiving $74 million from the Housing Accelerator Fund which is projected to bring 2,000 more units to the city by 2027.

Whether these measures will increase supply enough to catch up to demand remains to be seen.

The CMHC reports new housing starts remained flat in August

Despite measures from the government, new housing starts weren’t trending higher as of August 2023 according to the latest report from the Canadian Mortgage and Housing Corporation.

The CMHC reported this week that the seasonally adjusted annual rate of housing starts in August was 252,787 units compared with 255,232 in July, representing a slight decrease of 1%.

The most likely factors impacting the slow pace of new construction are a lack of labour and increasing costs due to inflation and rising interest rates.

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