Dave McKay highlights high housing costs and slow permits as major threats to Canadian talent retention
In a conversation with BNN Bloomberg, Dave McKay, president, and chief executive officer of Royal Bank of Canada (RBC), expressed concerns about Canada's housing crisis and its potential long-term effects on the economy.
McKay stressed that the high costs of housing are a significant issue for the country, possibly leading to a talent drain and impacting the retention of the next generation.
He emphasized the critical nature of this problem, stating, “If we don't solve it, we put our entire economy at risk, in that it's too expensive to live here, we don't attract the talent, we don't retain the next generation.”
He also pointed out a paradox in the real estate sector where the high interest rates, which are supposed to deter development, are needed to increase the supply to meet the high demand for housing.
This demand, according to McKay, stabilizes house prices even in what would typically be a declining market. However, the high rates prevent addressing this demand with increased supply.
McKay called attention to the prolonged permitting process, which he believes is too slow and hampers progress in business and construction, leading to missed opportunities compared to the US. He asserts that this delay is a significant challenge for the country.
On the topic of current economic conditions, McKay observed that the elevated interest rates are gradually bringing inflation down, albeit slower than desired.
He remains optimistic about achieving a “soft landing” for the Canadian economy, crediting previous tightening of monetary policy by the Bank of Canada for easing inflationary pressures.
Nonetheless, he noted that the easing has been partially offset by government deficits and the influx of a million new Canadians from abroad, adding to inflationary pressures.
Looking forward, McKay anticipates rate cuts in the coming months, which he believes will be a relief for Canadians, helping to reduce mortgage rates and the overall costs of servicing a mortgage.
However, he cautioned that even with potential rate reductions, the interest rates would likely remain high enough to continue impacting the economy.
He concluded by emphasizing that a reduction in rates would still represent a tightening condition for the economy, thus affecting its growth trajectory.
