Canada’s Effort to Address Housing Affordability Crisis by Shrinking Population
In a surprising move, Canada has taken a bold step to tackle the long-standing issue of housing affordability in the country by shrinking its population. This revelation comes from a recent report by BMO Capital Markets, shedding light on the failure of previous promises to triple the construction of new homes and create affordability through increased supply. Now, as Canada comes to terms with this reality, a ray of hope shines through as scaled-up building efforts align with a shrinking population, hinting at a potential solution to the affordability crisis.
Key Points from the Report:
- Canadian Real Estate Prices To Correct With Immigration Changes:
Canada is reevaluating its approach to immigration, shifting away from using it as a stimulus measure. Following a reduction in temporary residents like foreign students earlier this year, the country is now set to experience a state-mandated population decrease for the next two years. This strategic move aims to stabilize the housing market after failed attempts to boost homebuilding and address affordability concerns. - Demand Issue, Not Supply Problem:
Renowned economist Robert Kavcic of BMO has been vocal about the misconception surrounding the housing market, emphasizing that the real issue lies with demand rather than supply. Policies aimed at increasing home prices only inflated demand further, leading to a distorted market scenario. The recent adjustments to immigration targets are now expected to bring about a significant impact by curbing population growth and alleviating housing costs, particularly in the rental sector. -
Shift in Policy Perspective:
Policy makers are finally acknowledging that the housing affordability crisis was not caused by regulatory barriers or supply constraints as previously assumed. By removing certain regulations and providing financial incentives to developers, the government inadvertently fueled a rise in land values without substantially increasing construction activity. The focus has now shifted towards addressing the demand side of the equation, with hopes of restoring market balance and enhancing affordability in the long run.
In Conclusion:
Canada’s decision to address the housing affordability crisis by shrinking its population marks a significant step towards rectifying past policy failures. By acknowledging the true root cause of the issue and implementing strategic measures to curb demand, the country is on track to normalize the housing market and improve affordability levels. While the road to recovery may be long, the prospect of a more balanced and sustainable real estate landscape is certainly within reach.
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