Yahoo Finance Canadian Housing Now the Worst in Affordability Among G7 Countries
Written by Amy Legate-Wolfe at The Motley Fool Canada
Canadian housing supply continues to be unaffordable for many across the country. But a new report by Scotiabank states that it goes far beyond our own borders when comparing affordability.
In a report by the Canadian Big Six bank, it found Canada had the “lowest number of housing units per 1,000 residents of any G7 country.” This number has been steadily falling since 2016, so it isn’t just the pandemic that’s done it.
The plan now is to try and create 100,000 new homes for Canadians, but this was to keep the 2016 housing supply levels steady. Now, this would continue to leave us far below other G7 countries. Instead, Scotiabank argues we need closer to two million new homes.
Combination of problems
Since 2016, there have been several problems addressing the housing supply crisis. Of course, chief among them was the pandemic. This left construction at a standstill. But added to that, we then had supply disruptions. Further, inflation and interest rate hikes now make it even harder to get building underway.
While interest rates have at least perhaps led housing prices to peak, they’re still far higher than a few years back. In a report by the Canada Mortgage and Housing Corporation, the number to restore that affordability by 2030 is much higher. A total of 22 million housing units would be needed if they hope to create a home for everyone living in Canada by 2030.
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Aled ab Iorwerth, Deputy Chief Economist, CMHC
Mortgages unaffordable
It’s recommended that about 30% of your wages go towards caring for a home. But right now, Canadians are much higher than that number. In 2003 and 2004, CMHC states Canadians spent about 40-45% of their income on housing. As of 2021, that’s now closer to an incredible 60%!
To reach that 30% goal for housing supply, it would mean reaching an average of 3.5 million homes built by 2030. Two-thirds of these homes would need to be built in Canada’s most expensive locations, Ontario and British Columbia.
What this means for investors
You’re on Motley Fool to learn about investments, and frankly learning about housing is a good way to get in on a potential gold mine over the next decade. The housing supply crisis clearly needs supply to meet the demand and make housing more affordable. And if there’s one area that could benefit from this, it’s infrastructure companies.
So, if I’m looking at getting into the housing market over the next year, I would consider a stock like the BMO Global Infrastructure Fund (TSX:ZGI). You’ll receive growth from the increase in housing supply and other infrastructure projects, while also getting global diversification. Furthermore, it offers defence during a downturn. Infrastructure builds our sewers, roads, and more. So, these necessary items will remain even if the market continues to fall.
Foolish takeaway
If you can’t afford a home right now, it can be incredibly frustrating — especially if your current home costs are taking up an incredible 60% of your income. But if you invest in a fund like ZGI, you could at least take advantage of the move towards affordable housing. And hopefully that will allow you to reach your home ownership dreams far sooner.
The post Canadian Housing Now the Worst in Affordability Among G7 Countries appeared first on The Motley Fool Canada.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.
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