Housing
Trudeau’s 2024 budget could drive out investment as housing bubble continues
From LifeSiteNews
By David James
The extent to which the Canadian economy is distorted by a property bubble can be seen by comparing government debt with household debt, with the latter being 130 percent of GDP, nearly twice as much as American households.
Prime Minister Justin Trudeau’s federal government has brought in its 2024 budget, which projects C$53 billion in new spending over the next 5 years. It includes a significant capital gains tax increase, which some are warning will drive away investment, and a plan for more government-controlled public housing.
The Trudeau government is wrestling with a problem that is afflicting most English-speaking economies: how to deal with the consequences of a 20-year house price bubble that has led to deep social divisions, especially between baby boomers and people under 40.
House prices have tripled over the last 20 years on average, fuelled by the combination of aggressive bank lending and, until recently, falling interest rates. Neither is directly controlled by the federal government. There is no avenue to restrict how much banks lend and the Bank of Canada sets interest rates independently.
Accordingly, the Trudeau government is left to tinker at the edges. It will legislate an increase, from one half to two-thirds, in the share of capital gains subject to taxation for annual investment profits greater than C$250,000. The change will apply to individuals, companies and trusts.
Christina Freeland, Canada’s minister for finance, claimed improbably that only 0.13 percent of Canadians with an average income of $1.42 million are expected to pay more income tax on their capital gains in any given year.
That is a dubious forecast. The average house price in Canada 20 years ago was C$241,000; it is now C$719,000. Any Canadians who bought an investment property (family homes are exempt) before about 2015 are likely to have a capital gain larger than C$250,000 should they sell.
The government’s claim that the change will only affect a tiny proportion of Canada’s population is also belied by the government’s own forecast that the tax change will raise over C$20 billion over five years.
The extent to which the Canadian economy is distorted by a property bubble can be seen by comparing government debt with household debt. Canada’s government debt is fairly modest by current international standards: 67.8 percent of GDP in March 2023, down from 73 percent in the previous year. That is about half the U.S. government debt and half the average for G7 countries.
Canada’s budget deficit is also cautious by Western standards. In 2023-24 it was C$40 billion, equivalent to 1.4 percent of GDP. The U.S. budget deficit is currently over 6 percent of GDP.
By contrast Canada’s household debt, inflated by large mortgages, is at over 130 percent of GDP, making borrowers vulnerable to rising interest rates. U.S. household debt is about 75 percent of GDP. Attracted by rising house prices and the advantages of negative gearing (deducting rental losses from a property investment from income tax), Canadians have seen property as their preferred investment option.
Investors account for 30 percent of home buying in Canada, and about one in five properties is owned by an investor. Worse, the enthusiasm for property investment seems to be intensifying. According to one survey, 23 percent of Canadians who do not own a residential investment property say that they are likely to purchase one in the next five years, and 51 percent of current investors say that they are likely to purchase an additional residential investment property within the same time frame.
The problem with the bias towards property investment is that it is actually a punt on land values – and land is inherently unproductive. Business groups have criticized the government’s capital gains hike as a disincentive for investment and innovation, but the far bigger issue is investors’ focus on property, which is crowding out interest in other kinds of investments.
That means the main source investment capital for businesses will tend to come from institutions, such as mutual funds, which typically have a global, rather than local, orientation.
Faced with forces largely out of its control, the Trudeau government is fiddling at the edges. It has announced the introduction of what it calls “Canada’s Housing Plan”, which is aimed at unlocking over 3.8 million homes by 2031. Two million are expected to be new homes, with the government contributing to more than half of them. This will be done by converting underused federal offices into homes, building homes on Canada Post properties, redeveloping National Defence lands, creating more loans for building apartments in Ottawa, and looking at taxing vacant land.
The initiatives may have some effect on supply and demand, but the property price excesses are mainly a financial problem caused by unrestrained bank lending that has been fuelled by low interest rates. When a correction does occur, it will most likely be because of changed global financial conditions, not government policy or fiscal changes.
There are other measures that could be taken to address the property bubble such as reducing, or removing, negative gearing or more heavily taxing capital gains only on property but not other types of investments. But these policies would no doubt would be politically unsalable, so the Trudeau government is instead making minor changes, probably hoping that the problem will fix itself.
From the Fraser Institute
At a time when Canadians are grappling with epic housing supply and affordability challenges, the data show that homebuilding continues to come up short in some parts of the country including in several metro regions where most newcomers to Canada settle.
In both the Greater Toronto area and Metro Vancouver, housing starts have languished below levels needed to close the supply gaps that have opened up since 2019. In fact, the last 12-18 months have seen many planned development projects in Ontario and British Columbia delayed or cancelled outright amid a glut of new unsold condominium units and a sharp drop in population growth stemming from shifts in federal immigration policy.
At the same time, residential real estate sales have also been sluggish in some parts of the country. A fall-off in real estate transactions tends to have a lagged negative effect on construction investment—declining home sales today translate into fewer housing starts in the future.
While Prime Minister Carney’s Liberal government has pledged to double the pace of homebuilding, the on-the-ground reality points to stagnant or dwindling housing starts in many communities, particularly in Ontario and B.C. In July, the Canada Mortgage and Housing Corporation (CMHC) revised down its national forecast for housing starts over 2025/26, notwithstanding the intense political focus on boosting supply.
A slowdown in residential construction not only affects demand for services provided by homebuilders, it also has wider economic consequences owing to the size and reach of residential construction and the closely linked real estate sector. Overall, construction represents almost 8 per cent of Canada’s economy. If we exclude government-driven industries such as education, health care and social services, construction provides employment for more than one in 10 private-sector workers. Most of these jobs involve homebuilding, home renovation, and real estate sales and development.
As such, the economic consequences of declining housing starts are far-reaching and include reduced demand for goods and services produced by suppliers to the homebuilding industry, lower tax revenues for all levels of government, and slower economic growth. The weakness in residential investment has been a key factor pushing the Canadian economy close to recession in 2025.
Moreover, according to Statistics Canada, the value of GDP (in current dollars) directly attributable to housing reached $238 billion last year, up slightly from 2023 but less than in 2021 and 2022. Among the provinces, Ontario and B.C. have seen significant declines in residential construction GDP since 2022. This pattern is likely to persist into 2026.
Statistics Canada also estimates housing-related activity supported some 1.2 million jobs in 2024. This figure captures both the direct and indirect employment effects of residential construction and housing-related real estate activity. Approximately three-fifths of jobs tied to housing are “direct,” with the rest found in sectors—such as architecture, engineering, hardware and furniture stores, and lumber manufacturing—which supply the construction business or are otherwise affected by activity in the residential building and real estate industries.
Spending on homebuilding, home renovation and residential real estate transactions (added together) represents a substantial slice of Canada’s $3.3 trillion economy. This important sector sustains more than one million jobs, a figure that partly reflects the relatively labour-intensive nature of construction and some of the other industries related to homebuilding. Clearly, Canada’s economy will struggle to rebound from the doldrums of 2025 without a meaningful turnaround in homebuilding.
Jock Finlayson
The Trump administration is preparing to roll out a sweeping new housing initiative — a 50-year fixed-rate mortgage designed to make homeownership more accessible for working- and middle-class Americans. Federal Housing Finance Agency Director Bill Pulte confirmed Saturday that the plan is actively in development, calling it a “complete game changer.”
“Thanks to President Trump, we are indeed working on The 50 Year Mortgage — a complete game changer,” Pulte announced on X, posting a graphic from Trump’s Truth Social page that contrasted Franklin D. Roosevelt’s 30-year New Deal mortgage program with Trump’s 50-year proposal. FDR introduced the 30-year fixed mortgage in the 1930s to lift Americans out of the Great Depression. Nearly a century later, Trump is positioning the 50-year loan as a modern counterpart — a bold step to restore the American Dream for a generation shut out of the housing market.
The proposal comes amid record-high housing prices and interest rates that have pushed the average age of first-time homebuyers to 40 — the oldest ever recorded, according to the National Association of Realtors. In decades past, first-time buyers were often in their 20s or early 30s.
Mortgage data also shows how desperate buyers have become: adjustable-rate mortgage (ARM) applications, once a marginal share of the market, now account for roughly 10% of all applications — far above the post-2008 average of 6%, according to the Mortgage Bankers Association. The surge reflects how buyers are stretching to afford homes amid high monthly payments. A 50-year fixed mortgage would significantly reduce those monthly costs, though borrowers would pay more interest over the long term.
While details are still being finalized, the plan underscores Trump’s focus on affordability and opportunity — reviving the spirit of Roosevelt’s 30-year mortgage for a new era of Americans chasing the dream of homeownership.
Canada moves forward with digital identification for federal benefits seekers
It’s time for Canada to remember, the heroes of Kapyong
US Nuclear Bomber Fleet Shares Fence With Trailer Park Linked To Chinese Intel-Tied Fraudster
Chinese-Owned Trailer Park Beside U.S. Stealth Bomber Base Linked to Alleged Vancouver Repression Case
-
Frontier Centre for Public Policy1 day agoRichmond Mayor Warns Property Owners That The Cowichan Case Puts Their Titles At Risk
-
National2 days agoConservative bill would increase penalties for attacks on places of worship in Canada
-
armed forces2 days agoCanadian veteran says she knows at least 20 service members who were offered euthanasia
-
Alberta2 days agoHow economic corridors could shape a stronger Canadian future
-
Business1 day agoMark Carney Seeks to Replace Fiscal Watchdog with Loyal Lapdog
-
Business1 day ago
Sluggish homebuilding will have far-reaching effects on Canada’s economy
-
COVID-191 day agoMajor new studies link COVID shots to kidney disease, respiratory problems
-
Daily Caller2 days agoLaura Ingraham’s Viral Clash With Trump Prompts Her To Tell Real Reasons China Sends Students To US