Why Is Canada So Expensive?

Canada is a country that welcomes all cultures and tries to empower people irrespective of their religion, ethnicity, gender, or beliefs. It has become a multicultural society that contains the entire globe within its 9.985-million-kilometer square land. You will find English, Scottish, Irish, Indians, Italians, and many other nationalities here living peacefully together.

Canada is pretty expensive for many reasons, including a decrease in Availability of Land for Development, High Taxes, Inflation, and Climate Change. However, there is a lot to love that makes it worth it – great social programs, universal healthcare, strong communities, and a clean environment.

So why is Canada so expensive? How did it get this way? If you have been wondering about this question and are tired of getting half-baked information, this article is for you. We have expansively researched and listed the major elements that contribute to everything being so high-budgeted in the Great White North. Which one are these? Read below to find out!

What are the factors contributing to expensiveness in Canada?

There are a lot of different aspects that make it living in Canada, doing business there, or even shipping items to the country extremely expensive. Some of the most important ones are as follows:

Large Influx of Immigrants each year in Major Cities

In 2021, Canada aims to welcome approximately 401,000 permanent residents. While it is a great incentive to allow people of different nationalities to reside in the country. This does help their economy prosper and has helped them become a global economic hub with a diverse workforce. 

However, most immigrants tend to settle in the major cities because of their modern infrastructure, countless luxuries, attractive sceneries, and the ability to readily accept people of color. Due to these uncountable opportunities, the demand for real estate in such cities is extremely high. 

If we talk about basic economics, the price of any utility or resource price depends on demand or supply. If the supply is unable to meet the demand, the prices go up. In this case, the supply of real estate is insufficient as compared to the demand for real estate. And hence, the prices increase. Apart from real estate, many other necessities also have high prices because of this reason.

Decrease in Availability of Land for Development

Extending the above point, Toronto is one of the fastest-growing cities in Canada and has a large influx of immigrants each year. The city is surrounded by a greenbelt; a permanently protected green space and farmlands. Development in this area is prohibited to preserve nature.

However, this has decree sed the supply of area which could be used to develop schools, housing societies, and other buildings. Hence, the land for development is finite, and the country is unable to meet the high demand of residents.

Furthermore, Canada has strict zoning laws which limit the commercial, residential, and industrial use of land. Thus, such zones can also deject high-density housing units in the cities. This also reduces for land availability.

Inflation

Inflation is the reduction of the purchasing power of a particular currency as time passes. In simple words, it means that if you can buy a bag of chips for 1$ today, maybe a few days later, the price increases to 1.05$. So, you need more money to buy the same pack of chips! 

In simple economic terms; this is again a case of supply and demand. When there is an increased demand for a product, but not enough supply, people are willing to pay more for the products/services.  It can also be due to sudden increases in the costs of production.

According to Reuters, the annual inflation rate of the country is currently at 3.1% in June as compared to 3.6% in May but unfortunately, it still is above the target that the Bank of Canada has set which is 2% (1-3% control range). This means that while the prices of some items fell (such as Beef’s price fell by 11% as compared to 2020), for other items it rose (the price of gas increased 32% as compared to 2020).

These fluctuations have occurred due to the recent pandemic. The prices of almost all the utilities have gone up whether it is furnishings or beverages due to the surge in their demands.

High Taxes

Canada has almost 15 to 33 percent income tax. For example, if you are 100,000 dollars from a job per year, you might be getting approximately 77,000 after the tax reductions. This means that people have fewer savings and more expenditure. 

The general corporate tax rate is around 26.50 percent. These taxes are either paid by the shareholders, owners, employees (in the shape of lower wagers), or finally the customers who start to get the same products for a higher price. Hence, as a whole, the cost of living is increasing.

Climate Change

Yes, we hear this word almost every day these days but did you know that climate change can impact the economy and hence how expensive or inexpensive daily necessities become? Yes, climate change impacts prices a lot. 

Canada is a land that is no stranger to wildfires, heatwaves, droughts, and floods. According to the experts, the wildfires in some parts of Canada have started to generate their personalized weather systems. One such example is of a pyro-cumulus cloud which is also called the fire cloud. Due to the abundance of heat, wind, and fuel, there is a potential for frequent firestorms.

Apart from this, any major calamity impacts agriculture directly. In Canada, due to all the climatic changes, farmlands are being destroyed. In turn, the government imports vegetables and other items, and this cause the cost to increase.

The Bottom Line

Although the cost of living in Canada is increasing, most people are okay with it because they know that the government is trying to provide the best quality of life imaginable. But of course, high tax rates and inflation can put a strain on people who have low-income jobs. 

Hence, if you are thinking of moving to Canada or doing business in the country, you need to keep these points in your mind before making a final decision. 

Related Content

Thais R

I moved to Canada in 2016. This was the best decision that I ever made. I created this website to share what I’ve learned with anyone who’s thinking of moving or travelling to Canada.

Recent Posts