The Canada Mortgage and Housing Corporation (CMHC) recently reported that higher interest rates have significantly impacted housing construction across the country. According to their estimates, these rate increases resulted in about 30,000 fewer housing starts in 2023. This reduction marks a 10 to 15 percent drop compared to previous years, highlighting the challenges facing the housing market.
As interest rates have risen, borrowing costs for developers and homebuyers have also increased, which has slowed down new home construction. Higher rates mean that financing new projects has become more expensive, leading many developers to delay or cancel plans for new homes. This slowdown comes at a time when Canada is already facing a housing shortage, making the situation more concerning.
The lack of new housing starts worsens the supply crunch, as the country struggles to meet the demand for affordable homes. The effects are particularly pronounced in major cities like Toronto and Vancouver, where housing costs are already high. As fewer homes are built, affordability becomes an even more significant issue, putting pressure on policymakers to find solutions to the housing crisis.
CMHC has warned that without policy intervention, the trend of reduced housing starts could continue. They emphasize the need for both government action and private sector cooperation to encourage more housing development, especially with interest rates expected to remain high in the near future.
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