Sarah Kar Win Au Page 1 ECON 1900
New home construction slow-down hammers Canada
Less work, better economy! Is it healthy to slow down new home construction? A
reduction in new home construction across Canada which fell even more than expected.
This decline highlighted the challenges facing builders as they struggle to emerge from
the worst housing slump in October. One of the reasons is that the Harper government
had reined in its previous lax rules for mortgage lending. The maximum amortization
period from 30 years to 25 years and decrease the refinancing limit to 80%. New homes
construction ruins flow will deteriorate the market’s outlook, less income for people and
create housing shortage.
Some people think that the decline of new home construction will improve the
market’s outlook. A decrease in supply will rise in equilibrium price, the sellers will earn
more profit. Although more competition for fewer homes means upward pressure on
housing, the quantity sold equals to quantity supplied only. This will cause a decrease in
quantity sold. This profit will be less than the profit gain by selling more hoHome.
sales were 16.7 lower in Vancouver in October compared to last year, and down 7.1 per cent
New home construction slowdown will impose higher living costs. Many people
agreed that the number of new homes gear down proved the government’s new mortgage
lending rules are effective, however; this may cause other issues. Banks will set higher Sarah Kar Win Au Page 2 ECON 1900
interest rates on other loans such as credit cards and auto loans to offset the loss of
mortgage interest. In addition, with the