I bought my first house in Canada in my mid-twenties. If you are wondering why I am telling you this, keep the query shelved for a couple of paragraphs. We shall revisit it soon.
There are still too few houses
Well intentioned follies!
Unless the Federal government wants to go the Soviet way and take over the responsibility of building housing for everybody in Canada, it needs to create the right conditions for private builders to operate in. No business in the world will create supply if there isn’t sufficient demand. Now, given the situation in Canada right now, there is enormous demand. However, when you create conditions that prevent most potential buyers from even contemplating a future purchase, you stifle that demand artificially, leading to less demand, and thus depressed supply. This of course compounds the problem further, and in my humble opinion, is just bad economics.
In theory, increasing borrowing rates may seem like a sound measure to stem inflation, by pushing down demand and slowing the economy. However, when high inflation is primarily caused by weak housing supply, is that really the way to go? Yes, demand has decreased, because higher interest rates have ended up pricing out a section of potential buyers. But then, who are these potential buyers who have been priced out? Common sense dictates that these are primarily first-time home buyers, since they will be younger, with less accumulated (read disposable) wealth and a higher propensity to economically migrate to a different city, region or worse, country. Typically aged between 25 to 40, they are not just the ones who need housing the most, they are also the most productive components of the economy and society. By pricing them out for the foreseeable future, we are essentially setting an entire generation back, and driving them out of the local market. This will have manifold negative effects on the future of the Canadian economy and society, creating deep social, political, and economic divides that will end up causing a lot of unwanted friction within communities.
Are we offering a fair deal to the next generation?
Am I scare-mongering? No. But I am scared though. How can I not be! Afterall, I am a parent, and I share my concerns with millions of other parents in Canada right now. Have we inadvertently created a world where our children will find it significantly tougher to make it? Yes, I realize that some of us might be better equipped than others to ease our children’s path towards a meaningful future. However, for every one such lucky parent, there will be tens of hundreds who do not have that luxury. That means that some children will end up with lesser prospects and thus consigned to a fate to forever play catch up, for absolutely no fault of their own. Hark back to the first lines of this blog now. If you are my age, chances are that most of you will be able to match that statement, and some. It was different back then you might say, and you would be correct. The question we should be asking though is why is it so radically different today! We all know the answer to that one, don’t we? And while many of us are not directly responsible for the decisions taken in this country for the last two decades, as the defining generation, we all share some of that responsibility, don’t you think?
When I visit the different sites in which the CCI group is involved in, and come across young people with that same drive and hunger that I had at that age working construction, I cannot help but advocate for policies that will at the very least give them a decent chance to access the sort of assured future which my generation was able to chase a couple of decades ago. After all, that’s only fair, and for a brighter future Canada, a critical requirement!
Liberal economics 101: Demand stimulates supply.
The federal bank hence must consider pairing down on its current measures to temper inflation. Slowing the economy will only result in job, capital, and talent flight. It also sends the wrong message to talents globally who might be considering a future in Canada. Let’s remember, Canada is only one of the four or five major destinations that talented immigrants from the global south consider when deciding to immigrate to for jobs and higher studies. Canada needs talented immigrants if it wants to compete with other major developed economies. Without the right conditions, neither human nor material capital can flourish after all. Canada’s primary issue is housing, and housing supply will only increase if there is sustained demand.