Canada's Housing Crisis, Financial Implications, and Economic Trends

In this episode, the discussion begins with a welcome and introduction, followed by a sponsor message from Real Approved Inc. The focus then shifts to Canada's housing crisis, examining forecasts and predictions from the Canada Mortgage and Housing Corporation. The financial implications for governments and a development proposal in Vaughan are explored. The episode also addresses Gogama's housing dilemma and reviews MCAN Financial Group's quarterly earnings. The impact of the Canadian dollar and recent job data on the market is analyzed. The episode concludes with closing remarks and a sponsor reminder.

Episode Transcript

(00:00):
Welcome to the Ontario Mortgage & Real EstateInsights Podcast, your go-to source for the

(00:04):
latest developments, trends, and regulatorychanges in the industry.
I'm your host, Steve Hamoen, here to provideyou with insights sourced from reputable news
outlets to help you stay informed and makewell-informed decisions.
This podcast is brought to you by Real ApprovedInc., a trusted mortgage brokerage dedicated to

(00:25):
helping Canadians achieve their homeownershipdreams.
Visit realapproved.ca to learn more about howour experienced team can assist you with your
mortgage needs.
Let's dive into today's episode.
So, Janine, it looks like Canada's housingcrisis isn't going to ease up anytime soon.
Recent forecasts suggest that the number ofhousing starts is expected to decrease this

(00:48):
year and next, which contradicts the politicalpromises we've been hearing about increasing
the housing supply.
That's right, Steve.
The Canada Mortgage and Housing Corporation, orCMHC, is predicting that housing starts will
drop to about 237,800 this year, down from245,367 in 2024.

(01:13):
They're also forecasting a further decline to227,734 next year and 220,016 in 2027.
That's quite concerning given the demand forhousing across the country.
It is concerning, especially when you considerthat the CMHC says we need to add 480,000 homes

(01:34):
each year over the next decade to meet demand.
The drop in housing starts is particularlynoticeable in British Columbia and Ontario,
with decreases of eight and 25 percent,respectively.
These are areas already struggling with highhousing prices in cities like Vancouver and
Toronto.
Absolutely, Steve.
Affordability is a major issue, and with newconstruction slowing down, it's not helping the

(01:59):
situation.
Economists point out that more builds would notonly provide homes but also help bring down
prices by increasing supply.
Plus, it would stimulate economic activity andcreate jobs.
Right, and let's not forget the financialimplications for governments.
More construction means more tax revenue fromhousing developments, which is crucial for

(02:21):
municipal, provincial, and federal budgets.
Yet, we're seeing a lack of progress despitethe political promises made during the last
federal election.
True, Steve.
There are numerous factors at play here, likeincreased interest rates, labor costs, and
material prices, not to mention the red tapeand taxation that developers face.

(02:43):
It's a complex issue that requires acoordinated effort from all levels of
government to address effectively.
And let's not forget the lag time in theconstruction process.
It can take over a decade from when land isearmarked for development to when people can
move in.
This delay is a significant barrier to quicklyaddressing the housing shortage.

(03:04):
Exactly, Steve.
And with some developers sitting on approvedland until market conditions improve, it
exacerbates the problem.
It's a challenging situation, but hopefully,with continued dialogue and strategic planning,
we can find a way forward.
Janine, have you heard about the newdevelopment proposal in Vaughan?
It's a massive project that could really changethe skyline of the city.

(03:28):
Yes, Steve, I did.
It's quite an ambitious plan.
The Cortel Group is proposing to build 19towers on an 11.5-hectare site near Highway 7
and the future Concord GO station.
That's a significant amount of construction.
Absolutely, Janine.

(03:48):
This project is part of Vaughan's ongoingtransition from low-rise developments to
high-rise towers.
It's fascinating to see how these changes canredefine a city's landscape.
The development is expected to include 10,912residential units, which is a substantial
addition to the housing supply.
It's a huge number, Steve.

(04:10):
But while it's impressive, we need to considerthe impact on the community.
Such a large-scale development might bringchallenges, like increased traffic and pressure
on local services.
On the bright side, it could also mean morejobs and economic activity.
That's a good point, Janine.

(04:30):
The location is strategic, being close to afuture transit station, which should help
alleviate some traffic concerns.
Plus, the plan includes green spaces andconnections to natural landscapes, which could
enhance the quality of life for residents.
I agree, Steve.
The integration of green spaces and amenitieslike a health and wellness center, a daycare,

(04:53):
and even a grocery component is thoughtful.
These features could make the area moreattractive for families and individuals looking
for a well-rounded community.
Exactly, Janine.
It's important to create a balance betweenurban development and maintaining a livable
environment.
The inclusion of amenities could also increaseproperty values and appeal to a broader range

(05:14):
of potential buyers.
It's definitely a project that could bring alot of positive changes.
But Steve, what about the potential downsides?
Large-scale developments often face oppositionfrom local residents worried about changes to
their neighborhoods.
That's true, Janine.
It's essential for developers and city plannersto engage with the community and address any

(05:38):
concerns.
Transparency and dialogue are key to ensuringthat such projects are beneficial for everyone
involved.
Absolutely, Steve.
It's about finding a way to grow while stillrespecting the existing community and
environment.
With careful planning and communityinvolvement, this development could set a

(05:58):
positive example for future projects.
Let's shift gears and talk about Gogama, asmall community in rural Ontario that's been
facing a unique housing dilemma.
Despite having numerous vacant,government-owned properties, these homes
haven't been listed for sale, leaving bothresidents and local leaders frustrated.
That's an interesting situation, Steve.

(06:20):
Gogama, which is in an unincorporated area, hasseveral surplus homes that could potentially
help alleviate some of the housing shortages inthe region.
But, as it stands, none of these propertieshave been put on the market, which is really
unfortunate.
It's definitely a missed opportunity.
The properties in question include formerMinistry of Natural Resources and Forestry

(06:42):
buildings and Ontario Provincial Policeresidences.
France Gélinas, the Member of ProvincialParliament for Nickel Belt, has been advocating
for their sale for years, but the process seemsto be stuck in bureaucratic limbo.
It sounds like a classic case of red tapegetting in the way of progress.
Infrastructure Ontario is responsible for theseproperties, and they claim they're still

(07:06):
conducting necessary assessments before anysales can proceed.
But it's been years, and the community isanxious to see some movement.
Exactly, Janine.
And while these properties remain unsold, thegovernment continues to incur maintenance
costs.
It's a situation that doesn't make financialsense, especially when there are potential

(07:27):
buyers interested in purchasing these homes.
Plus, selling these homes could bring newfamilies into the community, which would be a
huge benefit.
Gogama could use an influx of residents toboost the local economy and support community
services.
It's clear that there's a lot of potentialhere, if only these properties were made
available.

(07:49):
And let's not forget the historical context.
Gogama has a rich history, but its populationhas dwindled over the years.
At its peak in the 1930s, it had more than2,000 residents, but now it's down to around
330.
Putting these homes on the market could helprevitalize the area.

(08:09):
You're right, Steve.
This isn't just about housing—it's aboutcommunity development and sustainability.
Bringing in new families could mean morevolunteers for local initiatives, more kids in
schools, and generally a more vibrant communitylife.
Absolutely.
And there's also the issue of how these surplusproperties are managed.

(08:31):
The Local Services Board in Gogama plays acrucial role in maintaining community services,
but they don't have control over the sale ofthese properties.
It's a complex situation that requirescoordination between multiple government
entities.
It certainly is complex, Steve.
But with a concerted effort from all partiesinvolved, including the provincial government,

(08:52):
there's hope that Gogama can overcome thesechallenges and turn its surplus homes into a
real asset for the community.
Janine, let's delve into MCAN Financial Group'srecent quarterly earnings.
Their net income for the second quarter hasgrown to twenty point two million dollars,
which is a slight increase from the nineteenpoint seven million dollars they reported the

(09:13):
same time last year.
That's interesting, Steve.
It sounds like their efforts in expanding loanportfolios and launching a new securitization
channel are paying off.
I noticed that their earnings per shareactually decreased slightly from zero point
fifty-two dollars to zero point fifty-onedollars, even though their net income rose.

(09:36):
What do you think caused that?
Well, Janine, the increase in net income islargely attributed to higher mortgage spread
income and increased earnings from their stakein MCAP.
However, the slight decrease in earnings pershare might be due to higher provisions for
credit losses, which rose to two point twomillion dollars from one point four million

(09:57):
dollars a year ago.
This seems to be linked to worsening economicforecasts and some provisioning on impaired
residential construction loans.
It's good to see that despite these challenges,Derek Sutherland, the CEO, remains optimistic
about their credit quality.
He highlighted record originations in theirinsured residential lending business and

(10:19):
emphasized the launch of an uninsuredresidential mortgage securitization program as
a key growth opportunity.
It's clear they are strategically navigatingthe current economic environment.
Absolutely, Janine.
Their strategic focus on expanding in Albertaand British Columbia's urban markets shows
they're capitalizing on areas with stronghousing demand.

(10:43):
They originated two hundred and thirty-onemillion dollars in uninsured residential
mortgages in the first half of this year,marking a seventeen percent increase from last
year.
And with the introduction of the newsecuritization program, they've already sold
eighty point two million dollars in July alone.
This diversification and capital optimizationcould provide a solid foundation for future

(11:06):
growth.
It's encouraging to see them investing insystems to enhance service for borrowers and
brokers as well.
Right, Janine.
Sutherland also mentioned maintaining theirpipeline for higher-yield residential
construction and completed-inventory loans,particularly in Ontario, British Columbia, and
Alberta.

(11:27):
These areas are experiencing population growthand a shortage of affordable housing, which
drives demand for housing developments.
It's a sensible approach, Steve.
By focusing on experienced developers with asuccessful track record, they can mitigate some
of the risks associated with constructionloans.
Plus, their partnership with MCAP seems to be akey driver of returns, with partnership income

(11:52):
rising three percent year-over-year.
Indeed, Janine.
Overall, MCAN's performance this quarterreflects a balanced strategy of growth and
careful risk management.
As they continue to adapt to market conditions,it'll be interesting to see how their efforts
in market expansion and securitization impacttheir future earnings.

(12:13):
Let's talk about the Canadian dollar, which hasmanaged to hold on to a weekly gain despite
some softer-than-expected jobs data.
The loonie was trading nearly unchanged at onepoint three seven four five per United States
dollar, or seventy-two point seventy-fiveUnited States cents, after moving in a range of
one point three seven two six to one pointthree seven six two.

(12:36):
For the week, the currency was up zero pointthree percent.
It sounds like the currency market isresponding to a mix of factors, Steve.
The Canadian economy shed forty thousand eighthundred jobs in July, which was quite a
disappointment compared to the expected gain ofthirteen thousand five hundred jobs.

(12:56):
This drop sent the employment rate to aneight-month low.
That's a significant change, Janine.
Interestingly, despite the job losses, theexpectations for interest rate cuts by the Bank
of Canada have only shifted slightly.
Investors now see a thirty-eight percent chanceof a rate cut by the central bank in September,

(13:16):
which is up from thirty-three percent beforethe jobs data was released.
It's a delicate balance, Steve.
The strategists at TD Securities mentioned thatwhile the trade deal with the United States
remains a looming risk, it may not be agame-changer for the economy or the Bank of
Canada.
After all, ninety-two percent of Canadianexports entered the United States market

(13:39):
tariff-free in June under theU.S.-Mexico-Canada Agreement.
That's quite a reassuring statistic forCanadian exporters.
Absolutely, Janine.
The fact that the Canadian dollar managed tomaintain its weekly gain suggests that the
market is still weighing these factors.
Meanwhile, Canadian bond yields eased acrossthe curve, with the ten-year yield down two

(14:02):
point five basis points at three point threeseven seven percent.
It's also worth noting that the Canadianten-year yield fell further below the U.S.
equivalent, widening the gap to aboutninety-one basis points.
This divergence could reflect differenteconomic outlooks and monetary policy
expectations between the two countries.

(14:25):
Indeed, Janine.
With these developments in mind, it's clearthat the Canadian dollar and bond markets are
navigating a complex landscape.
It'll be interesting to see how these dynamicsevolve as we get closer to the Bank of Canada's
next policy announcement.
Definitely, Steve.
As always, staying informed about these markettrends is crucial for anyone involved in the

(14:47):
real estate and mortgage sectors.
The currency and bond markets can havesignificant impacts on interest rates and,
ultimately, on mortgage costs for Canadians.
Thanks for tuning in to another episode of theOntario Mortgage & Real Estate Insights
Podcast.
We hope you found today's insights valuable asyou navigate the world of mortgages and real

(15:09):
estate.

Before you go, a quick reminder (15:10):
Real Approved is here to make your mortgage journey smoother.
Whether you're buying your first home orrefinancing, their experienced team is ready to
guide you with personalized support every stepof the way.
Visit realapproved.ca to get started and takethe next step toward achieving your
homeownership goals. Catch you next time, and stay informed with the latest industry

(15:35):
insights!