What is the impact of financing existing homes versus new constructions?

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Financing Existing Homes vs. New Constructions: Economic Impacts

Financing the purchase of an existing home primarily facilitates a change in ownership and can lead to increased housing costs without directly stimulating job creation or expanding the economy's productive capacity. In contrast, financing the construction of a new house generates direct employment and income for professionals and labourers involved in the building process.
Job Creation and Income Generation

The construction of new homes directly creates employment opportunities and generates income for a range of professionals, including architects, engineers, and construction workers. This activity contributes to the real economy by expanding the supply of housing and associated infrastructure.
Economic Contributions of Existing Home Purchases

When credit is used to finance the purchase of existing homes, particularly by buyers anticipating future capital appreciation, the economic impact differs. This type of financing does not inherently create new jobs or increase the economy's ability to produce goods and services. Instead, it primarily involves a transfer of an existing asset.
Affordability and Rental Market Consequences

A significant influx of credit directed towards the existing housing stock can exacerbate issues of housing unaffordability. As more buyers compete for a limited supply of homes, prices tend to rise. This not only makes homeownership more challenging but also leads to increased rental costs as landlords pass on higher acquisition and debt servicing expenses, consequently reducing household disposable income for essential goods and services.

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What is the impact of financing existing homes versus new constructions?

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