foreign home buyers and proposed a scheme of tax-free savings accounts for first-time buyers, if he is re-elected for a second term at the twentieth-September vote. The Liberal leader’s biggest rival in the election, Erin O’Toole, also introduced a similar plan last week, under which the Conservative party proposed a ban on home-buying for foreign investors who live outside of Canada for at least two years.
However, with more and more Canadians finding themselves left out of one of the hottest housing markets in the world, experts are of the view that monetary policy makers in the country have found themselves in a tight spot, unable to turn a blind eye to the on-going crisis.
“We’ve had a significant reliance on housing in our Canadian economic model,” Warren Lovely, chief rates and public sector strategist at National Bank, said. “At the same time, affordability is getting away from a lot of Canadians and may require a policy response, not just from politicians contesting the election, but ultimately from our monetary policy makers as well.”
He noted that the issue of affordability is no longer limited to urban areas like Toronto and Vancouver. “We’re seeing an erosion in affordability really across the country… If you’re a central banker, it is a bit of a pickle,” the National Bank Economist noted.
Data issued by Statistics Canada last week showed that in the second quarter of this year the North American nation underwent an economic contraction of 1.1 per cent, in stark contrast to the 2.5 per cent annualised growth rate previously projected by economists. Therefore, Lovely pointed out that the country is currently in a distorted environment, with much uncertainty looming over the horizon.
“We’re going to be going through the rest of this year, into next year, maybe even 2023, without knowing for certain where the country’s long-term trajectory is taking us,” he added. “We’d like to see a bit more of a balanced model where businesses are investing, becoming a bit more productive, contributing to the long-term expansion, and yes we also have population growth perhaps through immigration that’s contributing to growth.”
