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Failure to lower housing costs could 'put our entire economy at risk'



RBC's President and CEO, Dave McKay, recently voiced concerns about Canada's housing crisis, labeling it as a looming threat to the nation's economy. McKay emphasized the growing struggle many Canadians face in securing affordable housing, citing soaring costs as a major obstacle. He warned that failure to address this issue could lead to a detrimental exodus of talent and hinder the country's economic growth.


According to McKay, the real estate sector is currently trapped in a "catch-22" situation. Despite a significant demand for housing, high interest rates discourage developers from increasing supply, exacerbating the affordability crisis. McKay highlighted the need for a streamlined permitting process, stating that lengthy delays hinder business and contribute to lost opportunities, particularly in comparison to more efficient systems in the United States.


In the short term, McKay acknowledged that elevated interest rates are aiding in curbing inflation, albeit at a slower pace than desired. He expressed optimism regarding a "soft landing" for the Canadian economy, attributing recent actions by the Bank of Canada to alleviate inflationary pressures.


However, McKay cautioned that government deficits and a substantial influx of new immigrants are offsetting the effects of tighter monetary policy, thereby sustaining inflationary pressures. He anticipated rate cuts in the coming months, which could provide relief to Canadians by lowering mortgage rates and overall servicing costs. Nonetheless, McKay stressed that even with these reductions, interest rates are likely to remain high enough to restrain economic expansion.


In conclusion, McKay's remarks underscore the urgent need for concerted efforts to address Canada's housing affordability crisis. Failure to do so not only jeopardizes the country's economic stability but also risks driving away valuable talent and stifling future growth opportunities. As policymakers navigate the delicate balance between inflation control and economic stimulation, proactive measures to enhance housing supply and streamline regulatory processes are essential to safeguarding Canada's long-term prosperity.


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