2025 Market Outlook with CMHC's Chief Economist

[00:00:00] Welcome to The Canadian Real Estate Investor, where hosts Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio. It was a cold and blue winter's day as we departed from our Airbnb in downtown Montreal and made the trip to the nation's capital. But we weren't just going to Ottawa to take in the sights, we were there to head to the CMHC headquarters.

[00:00:28] That's right, CMHC, otherwise known as the Canadian Mortgage and Housing Corporation, which is Canada's federal Crown Corp responsible for administering the National Housing Act and with the mandate to improve housing for Canadians. You may have heard us mention them once or twice or dozens of times on the show. They put out amazing data and reports and we were honored to have been invited to conduct an interview with them.

[00:00:53] And even more delighted that upon our arrival, we discovered many of the people that we were meeting there were actually fans and listeners of the show. We sat up our cameras and microphones in a sunlit boardroom and prepared for our interview with the Chief Economist and Senior Vice President of Housing Insights, Mr. Mathieu LeBerge. But I had a hard time saying that so we just called him Matt. You actually have been practicing that. I know he's going to listen on Matt if you're listening.

[00:01:21] I did rehearse that three times before we recorded. Matt leads a team of experts in housing economics and insights whose work informs Canada's efforts to address key housing issues, which in today's world mostly includes housing affordability. Matt joins CMHC after working at a senior executive level for global consulting firms.

[00:01:46] He's advised federal, provincial, indigenous and municipal governments on things like economic analysis and modeling, macroeconomic forecasting and even social policymaking. And prior to consulting, Matt served as senior executive in a Canadian cabinet manager's office where he provided strategic advice on housing and social policy development.

[00:02:11] Safe to say that Matt knows a thing or two and him and his team put an insane amount of work into these reports and their findings. And honestly, Dan, he was just such a pleasure to speak with. Yeah, wealth of knowledge and incredibly good at distilling complex topics down to make them very accessible for the layperson. So I will applaud him for that. Like we answered what I would say. So we asked some pretty sophisticated questions and he gave very understandable answers to them.

[00:02:41] We discussed rents across the country, housing starts. We even discussed our commentary about how, you know, rentals.ca data kind of differs from theirs and how to use their data versus rentals.ca's data to advise yourself in this market. We talked about supply and demand, that concept of lagging data.

[00:02:58] So we hope you enjoy the first interview of many interviews that we're going to be doing with the CMHC and Matt, because it sounds like there'll be a pretty recurring guest on the show, which we're very excited about. Okay, we are on site today, Dan, but a site that we've never been to before. We are at the CMHC headquarters here in Ottawa, a very exciting place for us to be as we've spent years covering their reports and their data.

[00:03:26] We are here with Chief Economist and Senior Vice President of Housing Insights, Matt LeBerge. Did I do that right that way? You did. Okay, perfect. Thank you so much for having us today, Matt. And before we get into it, because we've got several questions for you, some reports that we want to discuss. And I know you've got some insider information that we're going to share on things like housing starts.

[00:03:50] But we'd love to hear a bit more about you, what you do here, how long you've been with CMHC and kind of your role within the organization. Well, for sure. And to start with, thanks for visiting. It's nice to have people coming over. So I rejoined CMHC a little more than a year ago. So I used to be here at CMHC, I would want to say maybe seven, eight years ago. I was always in the same team, essentially. And what I did in between, I was doing social policies in the minister's office.

[00:04:19] I worked in the private sector advising clients on housing and social policies, including indigenous groups. But about a year ago, there was an opportunity to come back and actually lead the team that does all the knowledge generation. So the report you talked about, Nick, this is my team that are doing them. And when you look at that, we have people doing data. We have people doing current analysis, which are the report. And we also have people doing research, which is like longer term, deeper root cause type of analysis.

[00:04:49] Amazing. Awesome. Yeah, you mentioned the report. So as you know, we covered it in detail on the podcast. And just wanted to get your thoughts. Like what were the key takeaways that you had from the report and anything that really stood out to you that you would want to share with the audience? For people to kind of focus on when they're taking the time to read through it. Well, I want to say I watched the episode and, you know, good job. It was nice to see someone go so much, do a deep dive in our report. I know you have some skepticism or criticism.

[00:05:19] I'm happy to talk about it. Yeah. But in terms of insights on the rental market, I think what comes out to me is things are improving, right? Supply has increased and supply has played its role. So essentially, vacancy rates went up because supply outplays demand and they're now much closer to their 10-year average. Like last year in October, they were at 2.2%. The 10-year average is 2.7%. So we're getting there, right? It's an improvement.

[00:05:48] Does that mean everything is fine and, you know, affordability is restored? Obviously not. Rents kept increasing, although at a slower pace. I think that's important to say as well. You know, in terms of slowing down Toronto led the pack, I think that's important to tell. It will be, you know, bring some breath of fresh air for renters in Toronto.

[00:06:10] Montreal and Vancouver also saw reductions, but not as much because the markets in Vancouver and Montreal remain very tight, especially in the rental. Montreal is a traditional rental market, right? Where people go more prominently as renters. And then there's Calgary. Calgary is also an important case because it did slow down. But in absolute terms, the pace of increasing rents remained very high. It's a very tight market.

[00:06:38] And there's two, call them, you know, slight outliers. Ottawa and Edmonton, they saw a pick up in pace. So these are signs typically of very, very tight markets. The last thing I'd say about the rental situation in Canada is, you know, we're still keeping a very tight eye on it. The reason is, you know, when you look at the status of affordability across the housing markets in Canada, COVID was a key, key point in time.

[00:07:08] Pre-COVID, things were hard in some markets, especially Toronto and Vancouver. But post-COVID, it spread across the country, especially for homeowners and homebuyers. And our reaction may be, well, that's surprising because we hear a lot about renters and you're telling us, well, it wasn't as bad for renters. Like the situation got worse, but not to the same extent than for homebuyers and homeowners.

[00:07:35] But I want really to keep a close eye for that because when homebuying and homeownership becomes less accessible, that means more people remain in the rental market. And we may still see, even though the situation is improving, we may still see this impact of the COVID in the Florida East spread across the country for renters still being active and alive in the next couple of years. I think, like geographically, that was really observable in Canada.

[00:08:06] Nick and I are both from the GTA and we saw a lot of young Torontonians leave for cities like Halifax or Calgary. And then you would assume that that would spread in such that that puts pressure on the Calgary market and some of the Calgary rental or ownership demand moves to Edmonton maybe or to Saskatchewan.

[00:08:28] Would it be fair to assume that, like, in the same way that it spread at the beginning of COVID in that, that you could see that actually kind of gradually trickle back where you see things loosen in the market like Toronto? And then maybe some people from Calgary say, well, if I can, I can afford a rent in Toronto again. So I'm going to move back. Is that observable? Like, is that something that you can see? Well, while this is, I can't say we've seen this to that, this movement to that extent yet.

[00:08:57] I mean, interprovincial. Historically, this is something we record, right? When the economy is better in an area than the other, people struggling less to find work in Calgary than in Toronto or in Vancouver and Montreal. People will move for work. It's just so happened also that this dynamic also plays in the rental market. If people find a job in the market that's more affordable, then they'll be incented to move.

[00:09:27] What we're seeing right now is that with the movement to return back to the office, some people surrounding the GTA are starting slowly to come back, right? Because rents are more affordable, because they're incented to do so. And so there's some walking back of this COVID spread right now. I can't say that we're seeing it interprovincially yet, but could it happen? Yes. Has it happened in the past? Yes.

[00:09:55] So that's certainly something that we're likely to see in the next couple of years. Sorry, one thing and I'll hand it over to you. But I'm a big fan of observing TomTom's traffic index. I'm not sure if you've looked at it. And I found that you can almost see the re-urbanization taking place. Like as Toronto becomes more mandated days in the office, the traffic's actually been – I think it was the third worst in the world last year.

[00:10:23] And now it's actually seen an improvement because it appears that people – It's the fourth worst in the world now, I guess. But it's been maybe people moving back to the downtown to be closer to work. Yes. And especially with Toronto loosening significantly on condo supply, it's not unreasonable to assume. Like I've even thought – think about it sometimes. It's like to have a pied-à-terre or be closer to work to get back into the city, right? Yeah, it's interesting.

[00:10:51] And, you know, outside of the TomTom stuff, we try to look at all the data provided. So another really great index is like the U-Haul index, right, which is tracking U-Haul movements across the provinces and whatnot. And, you know, we've been covering that for a few years. And now this is a good segue into the next question, which I want to clarify. It was not a criticism. But it was a – I wonder why. More of a question. Or a suggestion to use multiple data sources. Well, not even just that.

[00:11:18] I just mean, you know, when we're looking at the rental report or any of the reports that your team puts out, which are obviously amazing and the amount of work that goes into them, I can only imagine, right? We've got the easy job of taking it and talking about it for 45 minutes. But just like with everything in real estate, whether it's an interest rate that takes 18 months to work its way in or out of the economy, all of this stuff is lagging, right? Because it takes a long time to collect that.

[00:11:45] Now, there's other organizations out there, non-government organizations, that are able to collect and scrape data a lot more quickly and maybe put it out without having any repercussions of how sound it may be or how real it may be in that moment in time.

[00:12:02] Talk to us about what goes into the collection of this data and maybe why we have to deal with that lag and how that lag can be translated into, okay, well, you know, we were covering this report now, but this data is from six months ago or four months ago. Is it still realistic to even speak about kind of thing? I'd love to hear more.

[00:12:26] Well, that's both a very good question and a very, very fair observation about our timeliness, right? I take it very positively that people feel they can say that because it's true, basically. The reason is, and you alluded to it, is that we have a very thorough process to put this data. And the reason why we have that thorough process probably, you know, on par with StatsCan is that we're the national housing agency.

[00:12:54] We're Canada's national housing agency. And as the national housing agency, I'm pretty sure you don't want us to put out unreliable numbers, right? And so just to give a flavor of what's going on, because I think it may be interesting to people listening. We actually collect the data every October. It's a couple of weeks. We actually have people underground going and surveying, calling, you know, managers, getting information, all the information you have in the reports and the data files.

[00:13:23] It's actual people on the ground collecting it. But that's only the start of it. What happens next is they send it here, and we have, you know, a pretty extensive team of statisticians. The data team I was talking about, it's enumerators, people on the ground, it's statisticians that actually scrub the data, make sure it makes sense. Stress test it, stress test it, sorry, in some sense to make sure that there's no oddities or no outliers.

[00:13:50] And they'll pick up on those things and say, well, you know, we found this. How can we explain it? And then if we can't, well, we scratch until we do. And then they transfer that data to the current analysis team I was referring to. And this is a team of economists, statisticians, sociologists, anthropologists, you know, experts essentially of housing that look into the data to find what are the most relevant trends.

[00:14:18] But I feel like it's almost not just housing at that point. It's almost the study of human activity and human behavior, right? Which comes into sentiment, which is the kind of invisible hand that makes a lot of these decisions for the economy in general. Well, yes, I think you're bang on. Because we're not, like, it's easy to see housing and rentals as an investment vehicle. It's actually a home where people live from our perspective. So we have to understand what does that mean for Canadians.

[00:14:45] And all that occurs, actually, if you think about it, between May and October and roughly mid-December, right? It's not so long for all that to occur. The last thing I want to mention on this, though, is point taken. I actually agree. No, and I can tell you that the teams are working a lot, very hard to address both in terms of volume of data. You know, address the comments we received both in terms of volume of data we're putting out and timeliness of data we're putting out.

[00:15:14] That includes rental, but it goes far beyond rental. And, you know, fingers crossed. I hope I have more. I hope I can be back to your show in a couple of weeks to tell you more about this. But, you know, there's no good things coming. Yeah. Yeah. Yeah, I think it's interesting because I feel like the consumer has become more and more demanding of immediacy. And there's less and less care about accuracy, right?

[00:15:40] And so for us, you know, we had this discussion before we started about how, you know, when we were covering the report, we mentioned, like, you can observe in rentals.ca data as an example some different trends from – but they are, you know, that's December data rather than Q3. And so while you – but then, you know, in the next month, because it's month-over-month data and because it's asking rents and a handful of different things that kind of make the data points a little bit maybe less reliable, they're bouncy.

[00:16:07] And so, you know, we've often said and we'll always advise our audience, let's use multiple data sources. Let's see if we can kind of observe a trend and you can gather, you know, maybe, again, like a trend like you mentioned from some of these other sources. But if you really want the reliability, the things that you can present to your clients or make investment decisions based on, you have to use that data because it is – like you said, it's a very rigorous process.

[00:16:33] Exactly. You know, we're aiming to provide something that's usable by a wide array of audiences to be informed, make decisions and all that. But your point on having multiple sources is good, right? You can read our data that's not as tiny but very reliable in combination with data that's released more often but goes, you know, more volatile and look at the trend. And, you know, when you look at it, they both make sense. They jive together. I would say the same applies for analysts, right?

[00:16:59] Read our reports but read other reports. Read the bank's reports, consultant reports, independent researcher's report. Because when you get that multiplicity of views, you are better equipped to make sense out of it and also make your own decision based on what resonates more with you. Because in the end, right, again, housing and housing decision and even investment decision, this is very personal. It's about what I believe will happen. And especially in this context now, it's not obvious, right?

[00:17:27] You mentioned a little bit about returning affordability becoming like a factor in the rental side. Like as we're seeing interest rates come down, homeownership becoming more affordability, you start to see people exit. You know, you mentioned at the beginning of the discussion of people were staying in rental. Now they're beginning to leave. Is that something that is becoming apparent? Yeah, well, that's something very good to discuss because that's called filtering, right?

[00:17:56] When I am of the mind that, you know, any supply right now in Canada is good supply. It does happen that the bulk of the housing starts last year were for purpose-built rental, which I think is good in several ways. Because the new supply, some people, what I've heard is some people say, well, you know, it's good, but what's coming new is pretty expensive, right? And so it doesn't necessarily tackle the housing crisis.

[00:18:24] We have to say, well, hold on a second. Let's think about how does that work? If you have a more expensive unit coming in, someone will go and rent it out. He was living, that person, he or she was living somewhere, probably less expensive. So that frees up a unit that's more accessible. That will be, and then you have a cascade because the person going in that unit may have occupied, again, a less expensive unit.

[00:18:48] And so that's how you create, that's how supply creates affordability and accessibility for Canadians. The same applies to homeownership, right? When someone goes from rental to homeownership, it's really rare you go straight from your parent basement to buy a house, right, or a condo. So you've got, that's the type of moment we want to see that will recreate affordability and, you know, options for Canadians when it comes to housing. You know, this is something we're really watching an eye on.

[00:19:18] And yes, it is working. As you can see in the rental market report, 4-ish percent increase in supply led to a pretty significant increase in vacancy rates. So more options and a slowdown in rents. Yeah, it was surprising to see some of the vacancy rates across the country. But I want to pivot a little bit, Matt, because we're talking affordability. We're talking supply.

[00:19:41] I think this would be a great time to maybe jump into one of the new reports that you and your team have put together, which is the report on housing starts, right? We've seen, I would say it's a tale of two cities, but it seems to be a tale of 10 or 15 different cities here across the country, each of which have their own challenges, whether it be land constraints or zoning or provincial policy or any of those type of things.

[00:20:05] So maybe tell us a bit about the report, what went into it, and if you could share some of your findings, that would be awesome. Absolutely. So what we found is that last year, 2024, housing starts were up 2% relative to 2023, right? Which, you know, you may think it's not a lot of increase, but that makes 2024 the third highest year on record for housing starts. In the history of collecting that data? Since we collect the data, right? It's just shy of 2021 and 2022.

[00:20:36] So I think that's important to say, to dispel that notion that we're building at levels that are historically low. That's actually false. It's historically high. But yes, we're building at levels that are historically high. Does that mean we're building enough? Obviously not, right? We have to increase the pace of housing starts by a lot more to fix the current crisis.

[00:21:04] And then the question is, you know, is that feasible? And what we did in terms of research shows that, yes, you know, roughly speaking, we're building at about 240,000, like order magnitude these years. Our own estimates of building capacity, how many units we can build given the resources we have in the system is 400,000. So there's quite a gap, right? There's a number of reasons why, and we can dive into that. Yeah, I'd love to.

[00:21:33] The other thing, because before we dive into the reason why we're not at capacity, is to look at the different trends, as you said. Most, like when I was here 10 years ago, we're looking at, you know, the system was looking at housing from provincial perspective. I was like, well, no, it's a municipal thing. And now we're looking at municipal and saying, well, you know what? It's even in the neighborhood, right? Housing is very, very, very local.

[00:22:00] But when you look at what happened last year, you know, Quebec and Alberta, Montreal and Calgary were, and in Minton were, and Quebec City as well, were rebounded, for Quebec rebounding from low levels in 2023. So very healthy market over there, very healthy market in Alberta as well. Ontario and BC, Toronto and Vancouver didn't have such a healthy year. You know, we all heard, we all know about what's happening there.

[00:22:30] When you think about it and take a step back, there were actually going through what Montreal had gone through in 2023. So will there be a rebound, 0.25 for those two cities? We'll see. We have our housing market outlook coming up very soon. So that's something to be discussed. But the environment is pretty interesting and, you know, uncertain right now. Yeah, it's interesting.

[00:22:57] Like Toronto, from my perspective, and Vancouver as well, actually, like kind of dynamic in such that, you know, the majority of supply delivered in those markets was condo because you had investors lining up to pre-purchase those units. And now in an effort to try and keep supply moving and keep their businesses running, developers want to pivot to purpose-built rental, but the economics are still challenging.

[00:23:19] How do things like that factor into the ability for a city, especially cities like, you know, the Lower Mainland and the Greater Golden Horseshoe, but also cities across Canada? Like how do those factor into what you mentioned, this supply constraint? Yeah. And what other factors are kind of weighing on our ability to reach a passage? Yeah. There's a number. I totally agree right now. You know, the financials are hard to make work, both for condos and for rental, as you mentioned.

[00:23:48] But that has improved, right, over the last year. You know, and the other thing, I'm always a bit uneasy when people say, well, it's all about financial conditions. I'm not discounting the fact that they're tough. That's right. But before that, there was something else. And before that, there was something else. It's always, yeah. Exactly. It's never one thing. When you look at it, there's a couple of things. I would say, you know, adoption of innovation is hard. It's hard.

[00:24:16] The construction industry does remain pretty archaic in a lot of ways. Yeah. Slow moving for adoption. Hopefully we're seeing that change with, you know, the prop tech industry and construction technology. But fingers crossed, right? Because we need that to get to capacity, to building capacity. You know, I'm thinking about things that have been done elsewhere, like same type of weather. Northern Europe, for example. They do high-rise wood frame, right? Up to 60 stories.

[00:24:46] Can you imagine? We don't even do 20 here. That's cheaper, faster, greener. It sounds like something we want to do, right? We've got a lot of wood here in Canada as well. And maybe more inventories very soon. We can talk about that. Modular is one. Like people always say modular is standardized. It's not looking good. No, when you look at what Sweden's doing for modular, I was actually on a call with people from the Netherlands that do modular and they say, no, no, there's a way to make it look good and still standardize it.

[00:25:16] So there's, yes, resistance to adoption. But I don't want to put all the weight on industry. There's a responsibility to be open-minded and, you know, go with innovation, do new things. But the flip side of it is also regulations, right? When you look at it, I built a house a year and a half ago now. I live here in the national cattle region that I see as Ottawa and get snow. But on the get snow side, on the Quebec side, there was no way I could hire someone from Ottawa.

[00:25:45] They wouldn't cross the bridge because of regulation. Minutes away. They, a job that you're asking them to come and do and they can't cross the bridge because of provincial regulation. So our internal trade in Canada is a challenge. It's a challenge for all industries. But when you think about getting to scale for housing, this is a very prominent challenge.

[00:26:09] Because if you can move across boundaries, in some cases it even goes, there's constraints at the municipal level. Because the permitting process is not standard. Because the information requested and the way it's requested is not standard across municipalities in the same province. And so what happens then is a builder, a developer would probably keep in his or her own region just to make sure that that's what they know. They're used to it.

[00:26:38] And if their portfolio of projects is full, why bother going and scaling with another one partner and get more business? They're doing well. But it shouldn't be that if you drive half an hour down the highway, you're dealing with a whole new set of people, a whole new set of rules and regulations. I mean, that just doesn't make sense to me. Exactly. Right. And that's no inhibiting supply significantly.

[00:27:06] We did a survey that showed the cities that have less productivity in the country are also those that have the highest rent tape. Right. What a coincidence. Not surprisingly. But that survey was in 2022. And we've seen a lot change since then. Right. There is a housing accelerator fund. I'm sure you know about it.

[00:27:31] It's a program that incents municipalities to reduce red tape. But even municipalities and provinces are starting to understand the impact of that lack of standardization, that lack of scaling in regulation.

[00:28:16] I look at BC. Yeah. To merit that in some sense. It is such a good question because now we're at the point where, you know, I mean, Nick and I do a lot of stuff in the multiplex space in the city of Toronto. And they've made huge headway on up zoning neighborhoods to multiple units. There's reductions on DCs, which everybody says are the huge headwind. And it's like, okay, well, now all of a sudden you've basically got like almost an arbitrage where you can deliver a unit to market cheaper than anyone else. You don't have to pay DCs.

[00:28:45] You can rush through your building permits, no site plan. And yet the adoption's been slow, right? It's been less than. Same thing with the Lame We Sweet program. Yeah. And so I would totally agree with you. And like part of the thing that we really want to do to our audience and to Canadians is just to say we got what we wanted. Maybe we didn't get all of it, but we got this portion.

[00:29:10] And at least for now, we need to work very hard on doing what we said we were going to do in that portion. And that's something that I think like that's a big theme, especially for young people, for new investors with the new federal multiplexing programs for owner occupied multiplexes, right? Where if somebody wants to add to the secondary suite loan program and refinance out of that, it's never been easier for somebody to add units incrementally.

[00:29:36] For small investors, owners, owner occupiers to actually contribute to housing supply. I feel that the whole piece is really all about early adoption right now, right? I mean, we've seen the scissors come out and cut the red tape a little bit, right? I think there's still more to come in the coming year. We've seen those incremental differences, as you and Dan were just saying.

[00:30:03] But now it goes back to that small cap developer, that small cap investor, those citizen developers that are trying to figure this stuff out, trying to go and seek out that information. And I think it's just going to take a little bit of time, unfortunately, because all of this stuff is new and the early adoption.

[00:30:21] And we're talking to a lot of these people, and it really just becomes an information gathering and learning process for them and paving the way and going through the minutia of trying to figure all this stuff out that hasn't been done. It's not just going and building a house. Now you're going and building a four-unit house or putting a laneway suite in, which hasn't really been done at scale at all, right? Well, I think one thing – you're right about early adoption, by the way.

[00:30:50] I think one notion we need to dispel is that it's impossible, right? It's not easy to innovate and do different, but it's not impossible. Like other countries have done it. Even us, you know, government agencies have done a 3D-printed, whether appropriate house in Canada, right? So I think in the end, people need to change their mindset to, yeah, it's hard, but it's possible.

[00:31:15] At some point, you know, if it's not one of the current players, my belief is that there will be a disruptor coming in the system and showcasing it's possible. And then everyone will play catch-up. So if I have a message for industries, well, don't wait. You're showing it's possible. Just be the one, right? It's like that story of the four years. Everybody thought it was impossible to run a four-minute mile. Okay, yes, yes. And then one individual did it. And like within months, like 10 more people did it because they showed it was possible. Like we just need that person who's going to do that thing.

[00:31:45] I think the stakes are lower now than ever before too because like everything is very expensive. So if your complaint is – It's too expensive, yeah. Then stop eating because groceries are expensive too, right? That can't be the cough-out anymore. Well, the relative expensiveness of innovation is less, right? Like, you know, it's – yeah, very interesting. On that note, actually, because I think you alluded to tariffs a little bit.

[00:32:10] And one of the things I've been speaking with some developers in Toronto, and they've actually observed an inflationary pressure from U.S. consumers buying Canadian goods. Non-tariff goods, but also tariff stuff, so like steel, concrete, et cetera. So it's actually – a lot of the Ontario suppliers find it more compelling to take that product to the U.S.

[00:32:34] What kind of like things could take place, you know, if we see this – maybe I try not to force people into positions without to predict things. But like what are the – maybe the range of potential outcomes or the push and pull factors that could take place? It could be around tariffs, but also even just like inflationary pressures from Canadian U.S. dollar around the material side of things. Like, is there anything – Yeah, it's super interesting.

[00:32:59] And, you know, that's something where we're talking a lot about these days because as we were saying, we're doing our housing market outlook. And that's one key factor, right? So when you try to understand what's going on south of the border, it's all a matter. So you have to look – there's a couple of things. So tariff is one. The magnitude and timing of them is very unclear. We'll see.

[00:33:27] Maybe we'll know very soon or not, you know, depending on the different forces that play over there. And tariffs can play out in a couple of ways for the housing market. So I was alluding to inventory of wood. Like, we're a net exporter of wood, which means that if there's a tariff, we'll keep more wood here instead of – because the cost in the U.S. will be higher for our wood. But, you know, I think that may be an opportunity, right? If we have more wood here, wood reducers will want to still sell it, possibly at a lower price.

[00:33:57] So this is inflationary in that case. Talk about what an opportunity to try the high-rise wood frame buildings, right? When you talk about concrete and steel, it's the opposite. We are a net importer, which means having a tariff and possible retaliation, as we read in the news these days, wouldn't necessarily put inflationary pressures on the inputs for building housing in Canada.

[00:34:26] So all in all, it's not black or white, right? It's a lot of upsetting factors. But our own assessment right now is that tariffs, as they're discussed right now, whatever the magnitude and timing will be, you know, will put pressure on housing affordability. So we need to keep an eye for that. Now, the timing of the tariffs itself is important, but also the timing of the effect.

[00:34:51] And what I mean by that, there are other things the upcoming U.S. administration have discussed, like fiscal stimulus, right? We'll be putting inflationary pressure in the U.S., which means, you know, they may need to come to Canada for some supply, which would actually bring a breadth of economic support to Canada. So that would offset the tariff, at least in the short term.

[00:35:14] And so it's both fascinating and a bit mind-blowing because you want to make sense of all of that. And I don't think the human brain is really set to manage all that. Fortunately, we have computers for our models. The other factor I wanted to talk about, I think, you know, it's on everyone's mind in the housing system is immigration, right? There's been an announced change in the targets.

[00:35:38] I think that, you know, that will remove some pressure off the housing system. Now, the thing with immigration policies is they take time to take hold, right? And so it will have an impact reducing demand, but it will be very gradual and take several years to be materialized. I was going to say, speaking of lagging data, how long is that going to take effect? Because that's a question that we've been getting a lot, right?

[00:36:06] Well, you know, do I even buy a rental property anymore? Do I put another unit in my house because, you know, immigration's got cut in half? Well, and my answer, and I'm not claiming to be correct on this, but my thought is the problem still exists now and it's going to take years to fix. So, yeah, it's still a great opportunity to do that. And we're not cutting immigration to zero. We're cutting it substantially, but we had substantial immigration.

[00:36:32] So is that going to be a problem or is it almost part of the solution to get back to affordability? What's part of the solution or problem? What's the slashing of immigration? Well, that's a good question. So I think it will be supportive, but it will take time and be gradual. On your point about, okay, so what do I make of that information for people listening? That's where I go and say, know your market, right?

[00:37:00] Because the impact will be differentiated for different types of immigration. When you think, when you look at, you know, foreign students, for example, that was announced earlier, took effect earlier as well. And in building the rental market report, anecdotally what we heard is, you know, it was more difficult to find renters for units in college towns or university towns. So if that's your market, then you got to know that.

[00:37:29] For other types of immigration, it will be more gradual, more longer to take full effect, right? So it's, and again, it depends, you know, is your market like, if you look in Alberta, many markets are actually below the threshold. So they will be affected, but not to the same extent, probably a good place to look at. Toronto and Vancouver, we see the bulk of immigration in Canada, the impact will be faster and stronger as well.

[00:37:54] So these are all things you need to be really, really cognizant of your market, not even at the city level at that point. Like when you start talking about university and college towns, it's the neighborhood level. As you said, right, it's like those Russian dolls, right? You got to look at, you got to understand the big picture, but then, you know, take the other one, take the other one and really understand the neighborhood, right? Like understand that the four or five streets around you and the municipality there. Who's buying and renting that area, that specific area. Yeah. It's interesting.

[00:38:23] Like I had always thought, and maybe, maybe I'm, there are two different data points, let's say, but you're mentioning sort of like in regards to immigration being slow. So that's a reduction in demand.

[00:38:34] But I would also say, you know, the interesting part, like when you talk about this international students, and I think for, to some degree as well, temporary foreign workers, where maybe if they can't find a job because unemployment is rising in Canada, they may say, okay, well, I'm just going to go home and see if there's maybe a job room there. And I felt that the reduction that we were seeing in rents in Canada was coming from perhaps students and temporary foreign workers already beginning to leave.

[00:39:02] So maybe that immigration as well, people leaving Canada, is that like, is there any way to observe whether or not that would be having an impact? Or is it probably too early to tell? Well, you kind of need a bigger data set, a longer data set to see it. But there's, here's the thing, right? So there's the targets and what, there's what happens on the ground. And, you know, sometimes it takes more time to get to the targets than we hope or we plan for.

[00:39:28] And so that's, I think you're absolutely right, Dan, that we need to see how it unfolds. Right now, it's encouraging when we look at, you know, the trends. It does remove pressure on demand, but, you know, next several months will be super important. Like just one example. What if the U.S. administration goes to a good extent to their immigration policies south of the border? You know, we know they have a pretty full program on that.

[00:39:58] How does it, what does that mean for Canada? It probably means that, you know, for international migrants, we become all of a sudden more attractive, right? And so people who would have gone to the U.S. before may now look to Canada. And some of these people may be extremely well-educated, very labor market-ready people. Will we close the door? Well, probably not. We need them to increase our productivity. I don't want to presume of immigration policies going forward, but that's one of many scenarios that, you know,

[00:40:27] makes it important to follow suit on what's coming down the road. Yeah. Matt, I want to thank you so much. I feel like we only got through like half of what we wanted to talk about today. Your wealth of knowledge. It sounds like we're on board to do many more of this. Yeah. Anytime. That would be amazing. Just before we let you leave, is there anything you'd like to leave our audience, our national audience with? Something from yourself, something from CMHC? Any kind of parting words?

[00:40:52] You know, within the uncertain environment we're entering right now, just keep abreast of what's going on. We have reports coming to help inform. And we will be here to cover them. And we're here to respond. So please, please do reach out. This is something, you know, that's at the heart of what we do. And we're more than happy to stay present. Amazing. Such a pleasure. Thank you so much. Great pleasure for me as well. Thanks for the invitation. The content of this podcast is for educational and informational purposes only.

[00:41:20] It is not intended as financial, legal, or investment advice. Always consult a qualified professional for advice tailored to your unique circumstances. The views expressed are those of the hosts and guests and do not necessarily reflect the opinions of affiliated organizations. Daniel Foch is a real estate broker licensed with Valerie Real Estate Inc. Website is Valerie.ca, V-A-L-E-R-Y.ca.

[00:41:44] And a member of the Canadian Real Estate Association, the Ontario Real Estate Association, and the Toronto Real Estate Board. Nick Hill is a mortgage agent and partner at OWL Mortgage. License number 10317. Agent license M21004037.