canada interest rates

Canada's sky-high interest rates hammering new home construction

Statistics Canada has dropped its latest report on the country's GDP, and it's showing the interest rate is continuing to have an impact across the country, especially in the housing sector.

The monetary tightening from the Bank of Canada this year has been felt to a large degree in the construction industry at a time when low housing supply continues to be top of mind for Canadians, and cities like Vancouver and Toronto are seeing unimaginable rent prices.

That's according to the report from Statistics Canada, which finds that in the second quarter, housing investment fell again, led by a drop in new construction projects in all provinces except for Nova Scotia.

"Residential building construction (-2.0 per cent) was the largest contributor to the decrease, down for the 14th time in 15 months, reflecting continued declines in home alterations and improvement, and lower construction of new single-detached homes in the month," it wrote regarding June's data.

"These declines coincided with higher borrowing costs and lower demand for mortgage funds, as the Bank of Canada continued their monetary tightening, raising the policy interest rate to 4.75 per cent in the second quarter," the report reads.

Following the second quarter, the Bank of Canada raised the rate again in July, and it now sits at 5 per cent, with a looming announcement coming in September.

Some speculate the hikes could finally be cooling, and the bank will hold the rate steady, while others warn that it could be raised again.

While many hoping to buy a home will see fewer options on the market, interestingly, the real estate sector continues to see a lot of demand.

"Offices of real estate agents and brokers, however, rose for the second consecutive month, up 3 per cent, led by higher home reselling activity in BC and Alberta," Statistics Canada said.

Canada's real Gross Domestic Product fell by 0.2 per cent in June, about 3.5 per cent above its pre-pandemic levels, with predictions it will remain unchanged in July as well.

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