On Wednesday, the Bank of Canada maintained its policy interest rate at 4.5 percent, expressing continued confidence that inflation will continue to fall, from 5.2 percent in February to 3 percent by the middle of this year. The bank admitted that it will be more difficult to get inflation back to its objective of 2% in 2024.
The bank made clear that it is prepared to raise the policy rate further if necessary, but it would not specify whether another increase in the overnight rate is necessary to bring inflation back to target.
With a tight labour market and wage growth that is still only around 4 to 5 percent, persistent service costs in the Canadian economy continue to be the main driver of inflation. In the first three months of this year, Statistics Canada recorded 205,000 net new jobs, exceeding estimates, while the unemployment rate remained at a historic low of 5%.
The Canadian Economy in 2023:
The Canadian economy is expected to continue its steady growth in 2023, despite ongoing global economic uncertainties. According to the Bank of Canada’s latest projections, real gross domestic product (GDP) is forecasted to expand by 2.5% in 2023, which is slightly higher than the projected growth rate of 2.3% in 2022. This growth is expected to be driven by a rebound in consumer spending, increased business investment, and higher global demand for Canadian exports.
However, there are still some risks that could potentially impact the Canadian economy in 2023. One of the main concerns is the ongoing COVID-19 pandemic, which could continue to disrupt global supply chains and limit economic activity. Additionally, rising inflation and interest rates could also pose a challenge for the Canadian economy, especially if they lead to lower consumer spending and business investment.
Despite these risks, the overall outlook for the Canadian economy remains positive. With continued government support, a highly skilled workforce, and a strong export sector, Canada is well positioned to weather any potential economic headwinds and continue its growth trajectory in 2023 and beyond.
Housing Situation in Canada:
The Canadian housing market is expected to remain robust in 2023, with continued strong demand for homes and limited supply. This demand is expected to be driven by a combination of factors, including low interest rates, high levels of household savings, and strong population growth.
However, the limited supply of homes is expected to continue to put upward pressure on prices, especially in major urban centres like Toronto and Vancouver. According to the Canadian Real Estate Association, the average home price in Canada is expected to increase by 4.9% in 2023, which is slightly higher than the projected inflation rate of 3% by the midd of the year.
Canada has never seen such an explosion in population as back in 2022 with continuous trend in 2023. Over 1 Million of new immigrants, asylum seekers and war refugees came to Canada last year. How is Canadian government dealing with this population increase, housing shortages and sky rocketing home prices? Well, not enough in eyes of many Canadians who gave up looking to buy and home.
Canada is the second biggest country in the world with much land to build on including Crown land that sits just there, undeveloped and uncultivated while population suffocates in big cities and while affordability is word of the past decades.
Continued efforts will be needed to ensure that all Canadians have access to safe, affordable housing. While there is no affordability committee, no unions for new home buyers and no lobbying money that can flow to the government, the situation is not expected to improve any time soon.
As Canada is facing a housing affordability crisis, with rising home prices and limited supply putting pressure on the rental market. As a result, many Canadians are struggling to find affordable housing, which is driving up demand for rental units and pushing rent prices higher.
One of the main reasons for this phenomenon is that many Canadians are unable to purchase a home due to high prices and limited supply. This means that they must continue renting, which is leading to increased demand for rental units. With more people competing for limited rental properties, landlords are able to charge higher rent prices.
In addition, the high cost of owning a home is also leading to higher rent prices. As home prices rise, so do mortgage payments, property taxes, and maintenance costs. Landlords are required to cover these expenses and often pass them onto tenants in the form of higher rent prices.
The lack of affordable housing options in major urban centres is also contributing to higher rent prices. In cities like Toronto and Vancouver, high demand for rental properties is driving up prices, making it even more difficult for low and middle-income Canadians to find affordable housing.
Furthermore, the COVID-19 pandemic has exacerbated the situation, as many Canadians are now working from home and are seeking larger living spaces. This has increased demand for larger rental units, leading to higher rent prices for apartments and houses.
The root cause of affordability issue in Canada is obvious too many, but it looks like there is not enough will to be worked on this front. So, the Canadians will continuously have hard time to buy a property or to be able to afford the rent.