There are lots of innovators working hard in Canada, but the bottom line is that the country does not rank in the top 10 in the Global Innovation Index and the Conference Board has the country in the bottom half of its peers. High home prices make entrepreneurship, and taking risks in general, very difficult. When home prices are high, people are less likely to move to new areas for job opportunities, reducing growth.
High home prices, and mortgage service levels, also result in reduced consumer spending and investment. High home prices lead to increased debt, as people take out larger mortgages to afford homes, making it more difficult for individuals to save money, invest in businesses, or otherwise contribute to economic growth. In the a recent Angus Reid survey, more than half of Canadians said they couldn’t keep up with the cost of living.
Canadians devote more income to servicing debt than other major peers. This should come as no surprise when factoring in Canada’s high tax rates and record debt burdens. The question is where does the government expect investment in new business to come from as dollars go to servicing the existing debt burden, which is there because Canadians need a place to live. It’s difficult to blame people for wanting a backyard for their kids.
Over the past decade, Canadians were largely cautious about purchasing homes. The only time Canadians were given the all-clear to buy homes was just recently when Bank of Canada governor Tiff Macklem assured Canadian households and businesses that borrowing rates will remain at historic lows. The exact quote was as follows: “Our message to Canadians is that interest rates are very low and they’re going to be there for a long time.