Economists say high real estate prices in London, Ont., have put housing affordability at “crisis levels,” damaging the economy by making it difficult for local businesses to attract and retain labour, while forcing families to spend more of their budgets on rent or servicing mortgage debt.
The cost of rent in the city has risen about 90 per cent over the same period, driving the average cost for a one-bedroom apartment in London at $1,730 a month in April, according to the latest pricing report from online listing company rentals.ca.
“It’s at crisis levels for both rent and single-family homes,” said Mike Moffatt, a Western University economist and the senior director of policy at the Ottawa-based think tank The Smart Prosperity Institute, which has published a number of studies on the economics of housing in Ontario.
How high housing costs affect local businesses
“We’ve seen the price of single-family homes nearly double in the last four to five years. Interest rates are higher than they were back then, so monthly payments are up substantially.”
Economists say high housing costs can reduce worker mobility, making it more difficult for businesses to attract and retain the best talent. (Chelsea Kemp/CBC)
It isn’t just payments that are up. Debt, in general, is at record levels across the country. A report from the Canada Morgage and Housing Corporatation about household debt in May conclude that, at 107 per cent, Canadians have the worst household debt-to-GDP ratio of any G7 country.
When families are spending more on rent or mortgages, it takes money away from what would otherwise be spent in the rest of the economy, Moffatt said.
“It’s harmful to local businesses if individuals and families are paying a lot on either rent or interest costs — that’s money they’re not spending going to stores or going to restaurants.”
It also harms businesses by making them less competitive, he said, especially when they’re being forced to pay an employee more to make up for cheaper real estate in cities such as Calgary or Edmonton, where the average single-family home last month cost $674,000 and $512,000 respectively.
“Imagine a nurse or an electrician, or someone like that going, ‘Okay, well, why would I stay here when I could move to a place like Alberta and pay significantly less for a home and oftentimes earn higher wages?'”
How interest rate hikes can have the opposite effect on inflation
Wages, compared to housing costs, have stayed relatively flat, said Diana Mok, an associate professor at Western University who studies the economics of real estate.
Wage and income growth hasn’t kept pace with the growth of real estate and rent, reducing the spending power of individuals and families. (Colin Butler/CBC News)
“Salaries, wages and incomes are not increasing as fast as housing costs in general,” she said, adding families might take out an extra line of credit to balance the household budget against increased housing costs.
“The thing is, if you take an extra loan like a line of credit, it’s going to hurt the budget of the household or the person because it’s coming from higher interest costs as well.”
The Bank of Canada recently increased its key lending rate a quarter point to 4.75 per cent. Mok said she wouldn’t be surprised if the central bank keeps raising rates — something that could backfire if the people at the helm of the nation’s economy aren’t careful.
“One of the biggest components of inflation is really housing expenses,” she said, adding that higher interest rates as well as soaring real estate and rent costs contribute significantly to the country’s overall inflation rate, which then prompts the central bank to raise rates to bring down inflation.
“We raised the interest rate to keep inflation low. At the same time, you’re bringing up housing costs,” she said.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
