00:00:00:00

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[Visual: Joelle Hamilton and Kevin Hughes sit in arm chairs in a recording studio. Joelle has medium-length wavy brown hair with bangs. She wears a black jacket over a white top with green pants and black shoes. Kevin has short gray hair and wears a black suit with a black shirt and black shoes. Microphones on stands and side tables with open laptops frame their chairs. In the background, a wall-mounted screen displays text that reads, “In-House, Canada’s Housing Podcast.”]

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

Consumers, homebuyers, renters are still facing many headwinds in terms of the economy, but also in terms of housing markets and the lack of affordability.

00:00:11:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

I want to focus on what the outlook is for the next few years. Can you dive a little bit deeper into that?

00:00:19:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

We are in a context this year, in the coming years, where economic growth will be rather subdued. Still, you know, kind of relatively stable amounts of supply. And the rental market should stay a bit less tight than it was in the past years.

00:00:36:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

What are the biggest long-term challenges that you see with our housing market, Kevin?

00:00:41:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

The single biggest challenge is that for a great number of Canadians, housing is unaffordable.

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00:00:47:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

You’re listening to In House, Canada’s housing podcast, where we share the latest on Canada’s housing market.

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[Visual: Joelle and Keven sit in the studio.]

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00:01:03:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

The economy is gaining some momentum, but Canada’s housing market hasn’t really followed suit. Home sales remain soft, buyers are hesitant, and uncertainty continues to shape CMHC’s outlook. So what’s changed since our January forecast, and what does it mean for Canadians looking to rent, buy or build? Well, welcome to In-House, and I’m Joelle Hamilton. And today with me to answer these burning questions is Deputy Chief Economist Kevin Hughes. Welcome back, Kevin.

00:01:32:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

Thank you.

00:01:33:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

I feel like a lot has happened since you were here in January, so I’m excited to really dive in. But I’m hoping that you can give us a quick, maybe 20-second soundbite on the 1 thing you want our viewers to retain from this episode.

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00:01:50

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

Well, I think that definitely consumers, homebuyers, renters are still facing many headwinds in terms of the economy, but also in terms of housing markets and the lack of affordability.

00:02:05:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

Okay. So when you were here the last time and when we released our Housing Market Outlook in the winter, we were really expecting stronger economic conditions that would support a gradual recovery in the housing market. But as you briefly mentioned, that’s changed. Why?

00:02:25:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

I’d say structurally, nothing really has changed. The economy is as it was 6 months ago. But of course, there’s a few events that have transpired over the last 6 months. And this is precisely why we do an update, which is to adjust according to major events.

So obviously, there is the armed conflict in the Persian Gulf, which had impacts right away on gasoline prices. Inflation crept into inflation a bit, but also compounded the already high level of uncertainty for businesses and also for consumers. So that definitely was, you know, an additional element that was not foreseen. And of course, no one foresaw that.

The other element too, was that we’re continuing along our kind of rocky road on the trade story so that, you know, we’re still in a situation where negotiations are underway to try and resolve some of the differences between the way we see things in Canada and in the U.S. And so that, that’s continuing, but it’s still creating that uncertainty in terms of going forward. Do I buy a home? Do we hire people? So that’s holding back the economy.

So the economy could still be fundamentally sound, but it’s lacking that impetus to actually get into motion, right? So that’s something that’s certainly an important distinction to make.

We also talked, I think, the last time we met about the mortgage renewal wave, and I think we can say that that is more or less on the verge of being complete. No major shocks on that side. However, we have to realize that people now are paying higher interest rates and paying more every month for their mortgage and that is impacting their overall spending planning.

And so I think that’s a few things that we know we’ve seen now in the last 6 months.

00:04:27:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

Yeah, I mean, I and many Canadians out there had to rework our budgets based on the extra amount that I now have to pay towards my mortgage when I renewed my mortgage this spring, so a lot of us are definitely feeling that crunch.

Okay, but I want to fast forward just to today and talk specifically about what Canadians are experiencing on the housing market: 1. as renters, and then 2. as homeowners slash homebuyers.

00:05:01:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

Right. So renters have, generally speaking, more choice. So the market has eased. There is more supply because there has been a lot of building of rental apartments in the last year or so. So more supply, and demand has also gone down.

One of the areas that’s gone down is immigration. So those levels are lower. We were expecting that, and that’s been the case.

So, you know, supply, demand, it made its way into the numbers. And so we’re seeing markets that are eased.

Now, having said that, the rent levels are still very much high for many people. And so that is not to say that everything is rosy – not at all. So there has been a bit of adjustment there. But in many cases, it’s still quite difficult to find a place, even though the vacancy rates have gone up.

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00:05:51:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

I know Tanya was here talking about that when we did our Rental Market Report update and asking rents are falling, but the actual rent that tenants are paying is not necessarily dropping. So they’re all still feeling that financial crunch.

We’ve covered a lot, Kevin, about the economic uncertainties, the unaffordability of either homebuying or renting. But I want to focus on what the outlook is for the next few years. Can you dive a little bit deeper into that?

00:06:24:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

If we start with the economy, we still believe that the economy is facing several headwinds. And so we are in a context this year, in the coming years, where economic growth will be rather subdued. And this will have an impact on consumers and business’s decisions, especially consumers in housing to buy homes or even to form households.

So, you know, young people who are living with their families, you know, when economic times are good, they move out and then they, you know… so that may not happen at the same rate that it would – should – happen. So it will have impacts on demand, and that will influence obviously the market dynamics, the price dynamics as well.

Not much indication that supply either is going to be creeping up a lot, so still, you know, kind of relatively stable amounts of supply. And the rental market should stay a bit less tight than it was in past years. So we talked about easing. That should continue to be the case at least this year, maybe next year as well.

00:07:36:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

So if the scenario that you just talked about does not materialize for certain reasons, what is an alternate scenario?

00:07:48:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

This baseline scenario could be different, let’s say, if there were, for example, an intensification of the conflict in the Middle East, which would drive up, for longer, prices. So it wouldn’t just be prices at the pump, it would be general prices that would increase. Supply chains, for example, those would also lead to more inflation. So, those are things that could deteriorate on the international front.

On the trade front, of course, the negotiations could continue to drag for another year. I mean, we’ve assumed that in the coming years there will still be tariffs, and I think that so far that is likely to be the case, but it could deteriorate. That’s another way, another, you know, area where the economy could suffer.

And then, of course, homebuying. And of course, what’s the general environment here is that in this alternate scenario is that inflation would be higher perhaps and that would have definitely an impact on rates and, of course, on housing demand.

00:08:54:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

So we spent a lot of time talking about what we have, like, what we’re seeing today. So it was like that slowing demand, affordability has improved in some markets, the impact that economic uncertainties can have based on various scenarios. But we know that housing is a long-term issue, and that decisions that are made today in the housing sector, those shape what the market will be for years to come. So what are the biggest long-term challenges that you see with our housing market, Kevin?

00:09:33:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

I think without doubt the single biggest challenge is that for a great number of Canadians, housing is unaffordable, be it the rental market, be it the new home market or even the resale market. Incomes have not kept up with prices and it’s still… the gap is quite substantial. And as you know, we’ve measured what the supply gap would be, and it is quite a large gap. And as far as our forecasts are concerned, we are nowhere near filling that gap in the short term. And I think that’s no surprise to anyone.

We are encouraged, having said that, we are encouraged by the initiatives that are, you know, that are taking place right now to increase that supply. So that’s definitely, I think, you know, good news. But right now it’s not like this, as you said, it takes a while for these things to actually materialize.

So I think that really is the biggest challenge, without a doubt. And, you know, failing very, very rapid and substantial changes, which we don’t see in this outlook, things are probably going to stay the same before they get any better.

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00:10:34:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

And I can’t remember where I was reading this, but it’s about increasing supply, but also increasing so that it’s the type of supply that Canadians need down the road. So hopefully we’re making those decisions now.

00:10:56:00

[Speaker: Kevin Hughes, Deputy Chief Economist — CMHC]

Well, I mean, I’ll go back to your question with the decisions we make today have an enormous impact on, you know, what will… the implications on people, not only this generation, but as we know, housing lasts a long time. So that’s a very important call to make, and it’s not an easy one either.

00:11:15:00

[Speaker: Joelle Hamilton, Communications & Marketing — CMHC]

You’re very right. It’s not an easy one. And talking about housing is never an easy topic because it impacts millions of Canadians and everyone across the country.

But Kevin, that brings an end to our episode today. I want to thank you again for joining me in the studio and walking us through an update on our housing market perspective, which was very much due, because so much changed, so much changed between January and now.

So thank you. I’m looking forward to having you back in the studio in 6 months’ time. And I guess we’ll talk about what’s happened with the conflict in the Persian Gulf and CUSMA negotiations.

And thank you to our viewers for joining us In-House. See you later.

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