US & Canada

Interest Rate Cut⁣ Offers Hope to Canada‘s Sluggish Housing market

Canada’s housing market is receiving a potential boost from ⁢a recent ​interest rate cut coupled with a new federal initiative aimed at increasing housing supply. The moves come as affordability remains a meaningful ‍challenge for many Canadians, and concerns ‌linger about the potential economic impact of US tariffs.

On September 15th, the Canadian government announced the creation ‌of Build Canada Homes, a new ‌agency tasked with‍ accelerating⁤ the construction of up to 50,000 “factory-made” housing units on federally owned land, representing a 13 billion Canadian dollar (US$9.3bn) ⁤investment. Prime Minister Mark Carney stated⁢ the agency will⁣ “partner with private market developers to build affordable homes” for ⁢middle-class Canadians.

The government’s plan leverages a public-private ​partnership, with the private ⁢sector contributing “construction capacity, innovation, supply⁣ chains, and financing,” while the government provides “federal lands, faster approvals, and strong incentives.” A‍ key ​component of the initiative is a “buy Canadian” policy, designed‌ to “channel demand through Canadian industries” like lumber, aluminium, and steel, particularly considering US ‍tariffs.

The ‌declaration follows a recent interest rate cut, which mortgage broker Sialtsis believes ⁤will further strengthen the​ real estate market. “Personally, I have seen significant enhancement‍ in my business activity over the last couple of weeks,” she told Al Jazeera, “and expect​ that​ this announcement will continue to strengthen it.”

Despite optimism, ⁢experts caution against over-reliance on private developers. Economist Jim⁤ Stanford, with the Centre⁢ for future Work, described the federal promises to expand housing supply as “aspiring,” and acknowledged a housing expansion would help mitigate the‌ impact of potential “Trump​ tariffs.” Though, he warned ‌that private developers are “very speculative and very ‌financialised.”

“If it’s just⁢ left to the private housing industry … we coudl see ⁢one⁢ of the ramifications of a Trump recession would be a further decline‌ in housing prices,” he cautioned, “and a decline in housing construction.” The ⁣Canada Mortgage and Housing Corporation also notes that falling prices combined with tighter credit can pose “risks for buyers,” and an oversupply of unsold homes could lead to project delays or cancellations.

Housing Minister Robertson emphasized the urgency of addressing the affordability crisis, stating, “we need to ​really scale up the number of​ homes being built⁤ below market, and make it more affordable for Canadians.” While approximately two-thirds of Canadians currently own their primary residence,affordability remains a major obstacle for ⁤many,including renters and first-time homebuyers.

Despite a slow recovery this year, Sialtsis ‍expressed continued confidence in the overall “strength” of Canada’s ⁤real ⁢estate market.