Over 400 people crowded into the main ballroom at the Bellvue Manor in Concord, Ontario, to hear two charismatic and dynamic speakers give us both a glimpse of the future and some hope to move forward from the current economic recession and find a path of solving the housing crisis.
George Carras, of R-LABS, focussed on the immediate need of the housing industry to enter the 21st century and look for innovative ways of building and selling new homes in an efficient cost-effective manner. He put up on the screen a picture of a pilot in a cockpit in the 50’s and a bricklayer putting up bricks in the 50’s. He then showed what the current cockpit looked like in the 2020’s and a current picture of a bricklayer working on a local site. Not much had changed for the bricklayers unfortunately. And that says it all for our industry. He focussed on the many opportunities for builders to take the lead on innovation and invest in R&D. But they can’t do it alone and need tremendous support from the government but they need the initiative.
Following George’s inspiring talk, came the ever popular and entertaining Benjamin Tal, Deputy Chief Economist at CIBC World Markets. Many of the things he spoke about he has addressed in the past. That doesn’t mean they are still not applicable today. Here is a snapshot of what he had to say:
- BOC has to understand that we are in a recession. They are not going to cause a recession, they have caused it already. GDP is down. Consumer purchasing is down. The $165B of savings that were generated by Canadian population during the stay-at-home COVID is all gone.
- You can’t compare our inflation rates to that of the United States. 40% of their inflation measurement includes shelter factor which is rental rates. In Canada, only 30% is represented by the shelter factor and that is the increase in interest rates. That among other reasons, explains why the inflation rate is generally twice the level of Canada.
- Inflation has been beaten and the BOC has to recognize it. The fact that prices are still rising is not the issue. The fact that the prices are rising at a level that is less than half of what they were last year and dropping is what they should be focussing on.
- When you take out the mortgage interest component of Canadian inflation, the BOC has actually achieved the 2% level. It is unfair to look at that rate which has been increased directly by the actions of the BOC. People don’t have a choice in spending money on their housing and the BOC has raised it significantly. He is hoping that the BOC will finally listen and cease its relentless march to the 2% Shangri La of inflation.
Here is his Forecast:
(a) Next week on October 25, 2023, the BOC will keep rates steady and barring unforeseen circumstances, should keep them steady through the first 2 quarters of 2024;
(b) Interest rates should start dropping by mid-2024 and ultimately, within the year or into 2025, the BOC rate should drop from its current 5% level to 2.75% - 3%; and
(c) The real estate industry is strictly on pause. The demand for housing is immense and is understated when you take into account foreign students who are coming here, as well as those that don’t go back and apply for PR status. These numbers are not normally reflected in the Statistics Canada numbers. That could mean another million people looking for homes. The restart will come at some point when the rates come down and hopefully, costs start ameliorating.
Ben’s Wish List
(a) Ontario will never achieve its 1.5M homes in 10 years based on the current technology. He supports fully George’s cry for innovation in this industry to come up with cheaper and better homes;
(b) We need to focus on purpose-built rentals. Not everyone can get a home to buy. This is where much of the new housing should come from to satisfy the overwhelming demand;
(c) We need to attract foreign students but better students coming from better schools. Many of these students come from schools with questionable academic standards;
(d) We need more immigration, but we need the right immigration. Construction workers used to be 4% of the immigrants. Now they are only 2%. This has to change and the points for construction workers has to increase.