This text is part of the special Real Estate section
Explosion in home prices during the pandemic, rising interest rates, lack of supply… Real estate market conditions are making purchasing a property increasingly difficult for young adults.
“We are experiencing a perfect storm,” says Mario Fortin, full professor of economics at the University of Sherbrooke. He believes that access to housing itself is compromised in current circumstances.
Despite successive increases in the key rate by the Bank of Canada since March 2022, house prices continue to rise. “That’s what makes the problem so complicated at the moment. Normally, that’s not what we should see. And there is a certain urgency to act,” he observes.
The costs for new housing are also increasing, preventing many developers from reaching a profitability threshold, believes Mr. Fortin. This has the effect of reducing construction starts. Last August, they had also decreased by 2% compared to the same period in 2022. This is a 14e decline over the past 15 months, observes the Association of Construction and Housing Professionals of Quebec (APCHQ). In September, they finally saw an increase again, with 3.9% more than in August.
Low interest rates and financial aid provided by the government have encouraged prices to rise during the pandemic. The growth in population and number of people living alone also contributes to the housing shortage. According to Statistics Canada, 4.4 million individuals lived alone in 2021, and represented one in ten households across the country. It is in Quebec that this proportion is greatest, with a rate of 19%.
CELIAPP, a “double-edged” tool
Announced in 2022 by the government led by Justin Trudeau, CELIAPP offers aspiring buyers the opportunity to save up to $40,000 in tax-deductible annual contributions in order to build up a down payment.
While he concedes that this new tool will facilitate access to property, Mr. Fortin believes that this will also lead to other increases in house prices. “When we give such subsidies, we increase demand. And that drives up prices, so it’s a double-edged sword,” he illustrates.
If North American tradition favors access to property, Mr. Fortin does not know if future generations will be able to do so. “But will it put them in a more damaging financial situation? I’m not sure,” he adds.
He believes that current tax rules also favor ownership to the detriment of rental, in particular through capital gains which are not taxable upon the sale of a main residence. “If people are tenants, shouldn’t they possibly be entitled to some form of compensation? It could, if access to property becomes more difficult. These are thoughts that we will have to have,” he says.
At a time when more and more young adults are sharing an apartment or living with their parents, Mr. Fortin also believes that the establishment of a tax credit for cohabitation could encourage some to live with several people under the same roof. . “Access to property for young people has become a problem which, unfortunately, will take a very long time to resolve. »
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