FILE PHOTO: Houses are seen for sale and under construction in a neighbourhood of OttawaTORONTO - Canada's residential construction activity has slowed in recent months due to a tight labor market and higher borrowing costs, a factor that could thwart government plans to reduce a housing shortfall and add to the recovery in home prices.
The Liberal Party government's ambitious plan to welcome 500,000 immigrants per year by 2025, or about 1.25% of its population, is expected to fuel robust demand for housing. Housing starts, however, will decline to 212,000 units in 2023 from 262,000 in 2022, held back by labor shortages, the high cost of materials and increased financing costs for developers, Canada Mortgage and Housing Corporation, the national housing agency, projected last month.
Interest rates could rise further after data on Wednesday showed stronger-than-expected economic growth, while there are other obstacles to new home construction, such as environmental opposition to building on protected land, and resistance to urban density, said James Laird, co-founder of mortgage rate comparison site Ratehub.ca."The 'not in my back yard' mentality applies throughout every city," Laird said. "That really slows things down.