In an era where economic stability is paramount, business leaders across Canada are pointing to the housing market as the most significant risk to the country’s economic health. A recent survey conducted by KPMG Canada has shed light on this pressing concern.

The survey reveals a near-unanimous agreement among the nation’s business elites. The findings indicate that high housing costs and a scarcity of available housing are viewed as the primary threats to the Canadian economy, underscoring the urgent need for this issue to be a focal point in upcoming federal budget discussions.

The Core Findings

The KPMG survey’s results are stark: 94% of the 534 business leaders surveyed concur that the exorbitant cost of housing and a glaring lack of supply stand as the foremost risk to economic stability. This consensus among the surveyed population, which encompasses a wide array of industries, highlights a growing concern that transcends the business sector, touching the lives of Canadians in every corner of the country.

The Impact on Businesses

The ramifications of the housing crisis extend deep into the operational realms of businesses. According to the survey, an overwhelming 87% of respondents have been compelled to increase wages as a strategic move to attract and retain talent amidst soaring living costs. This inflation in payroll expenses is not just a financial strain on businesses but also contributes to the broader economic challenge of managing inflation.

Caroline Charest, a respected economist and partner at KPMG based in Montreal, voiced the concerns of many by stating, “What we’re seeing in the survey is that businesses are needing to pay more to enable their workers to absorb these higher costs of living.” The need to hike wages to counterbalance living expenses is inadvertently fueling the very inflation businesses seek to control, creating a vicious cycle that is tough to break.

Housing Costs and Economic Vulnerability

The survey also shed light on the broader economic implications of high housing costs and rising interest rates. Households already grappling with significant debt are finding themselves further strained, leaving them exceedingly vulnerable, especially in times of economic downturn. Caroline Charest emphasized the precarious position of household balance sheets.

Which, when combined with persistent inflation driven by housing costs, present substantial challenges to economic stability. This situation complicates efforts to lower inflation rates, which would, in turn, allow for reduced interest rates, illustrating the complex interplay between housing costs and broader economic health.

Business and Public Sector Responses

The KPMG survey is not the first to sound the alarm on the housing crisis and its impact on the business landscape. A report from the Ontario Chamber of Commerce last year echoed similar concerns, emphasizing the difficulty businesses face in attracting talent due to the housing crunch. Nearly 90% of businesses desire more collaboration between the public and private sectors to tackle the housing crisis effectively.

Charest highlighted the importance of a united approach: “How can we bring all stakeholders, that being governments, not-for-profit organizations, the community, and the private sector together, to find solutions to develop new models to deliver housing?”

Government Measures and Business Opinions

The federal government has proactively rolled out funding supports and introduced measures such as a GST rebate for rental housing construction. However, its direct control over housing issues is limited. The KPMG survey indicates strong support from the business community for tax measures to make housing payments more affordable, such as making mortgage interest tax deductible. There’s also a clear preference for maintaining the capital gains tax exemption for a primary residence, highlighting the nuanced views within the business sector on addressing the housing crisis.

Survey Demographics and Methodology

Conducted in February, the survey utilized Sago’s Methodify online research platform to gather insights from 534 business owners and executive-level decision-makers. The respondents’ demographics were diverse, with about a third representing companies with revenues exceeding $500 million, half with revenues between $100 million and $500 million, and the remainder falling below this threshold. This wide-ranging representation provides a comprehensive view of Canada’s business landscape sentiments.

Conclusion

The KPMG survey presents a clear message from Canada’s business leaders: the housing crisis is not just a social issue but a significant economic threat that demands immediate and concerted action. The majority of business leaders are advocating for a multi-faceted approach that involves both the public and private sectors.

The path forward requires innovative solutions and collaborative efforts to ensure economic stability and prosperity for all Canadians. As the federal budget approaches, the insights from this survey underscore the necessity of placing housing at the forefront of economic policy discussions, aiming to mitigate the risks posed by the current housing situation and foster a more resilient economy.

Source: https://www.cp24.com/news/business-leaders-say-housing-biggest-risk-to-economy-kpmg-survey-1.6823970