Pervasive Interest Rate Challenges: Canadian Home Builders Experience 22% Project Cancellation Rate
2 min read
The Canadian housing market is currently facing a significant challenge – the rise in interest rates. The decision by the Bank of Canada to raise interest rates, including a hike in July, has compounded affordability concerns and disrupted the smooth conversion of potential buyers into confirmed sales. Almost half of Canadian Home Builders’ Association (CHBA)'s panelists have turned to alternative lending solutions, while a third have found it necessary to make accommodations for buyers in order to facilitate successful closings.
The reverberations of this slowdown are being felt throughout the sector, with 67% of home builders and developers in the CHBA network reporting a reduction in construction output. Even more concerning is the fact that 22% have been compelled to entirely cancel projects, signifying a troubling trend of increasing project cancellations. CHBA CEO Kevin Lee has emphasized the gravity of the situation, highlighting that the current environment, characterized by rising construction costs, labor shortages, and challenging financing conditions, poses a severe threat to addressing the nation's housing supply shortage.
In the face of this uncertain landscape, a collaborative effort is urgently required to strike a balance between the impact of interest rates and the goal of maintaining affordable homeownership. Implementing cooperative measures between the industry and policymakers is of utmost importance in navigating these challenges and revitalizing the Canadian housing market. This endeavor is essential to ensure the market's resilience and secure its future growth.
References
Feinstein, C. (2023, August 15). 22 per cent of Canadian homebuilders cancel projects amid high rates despite severe housing shortage. Toronto Star. https://www.thestar.com/real-estate/22-per-cent-of-canadian-homebuilders-cancel-projects-amid-high-rates-despite-severe-housing-shortage/article_cbcccf90-2426-599b-8c11-3d42c45382f4.html
Kassam, Z. (2023, August 9). 67% of home builders, developers say they’re building fewer units as market slows. STOREYS. https://storeys.com/home-builders-chba-q2-2023/
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