Bank of Canada Governor Tiff Macklem speaks during a fireside chat Tuesday, February 6, 2024 in Montreal. THE CANADIAN PRESS/Christinne Muschi
As inflation comes under control, there is a growing chorus calling on the central bank to cut interest rates, easing at least some affordability issues. But Bank of Canada governor Tiff Macklem says a lower interest rate isn't the silver bullet people are hoping for.Bank of Canada governor Tiff Macklem, shown speaking in Montreal on Tuesday, says when it comes to housing affordability, the real issue isn't interest rates but that supply has fallen short of demand for years.
"Housing affordability is a significant problem in Canada but not one that can be fixed by raising or lowering interest rates," Macklem said"There are many reasons why: zoning restrictions, delays and uncertainties in the approval processes and shortages of skilled workers. None of these are things monetary policy can address," he said in his address to the Montreal Council on Foreign Relations.
"Close to 60 per cent of all households could afford to own at least a regular condo apartment in 2019 based on their income. That share has plummeted to 45 per cent in 2023," assistant chief economistThe Canadian Home Builders' Association says housing starts have fallen for two consecutive years. And its CEO says high interest rates are at least part of the reason.
The Canada Mortgage and Housing Corporation surveyed developers constructing purpose-built rentals last fall. Three main concerns were raised: significantly higher construction costs, development fees and higher lending rates. "The impact of raising the policy rate is actually to bring the housing market into better balance, not by reducing supply but by reducing demand and bringing it more in line with supply," he said.is going to start cutting interest rates this summer
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