Most Are Still Bullish About the Canadian Real Estate Market
The housing bubble bursters are back. Ok, they never actually left but reality tends to drown out their doom and gloom philosophies, at least most of the time. This latest bubble alert hails from media outlets and economists in Toronto who apparently have a severe case of tunnel vision.
News flash: Canada exits beyond Highway 427 and the Don Valley Parkway. Toronto and its west coast counterpart Vancouver do have expensive home prices. But look beyond these two mega cities and you’ll find growing markets across the country. Remember Alberta, where energy is king and where that energy is fueling a large portion of the Canadian economy? The housing marking is doing swimmingly in that province.
Stefane Marion is a highly respected economist at the National Bank’s Montreal office. He made the list of top 20 forecasters put out by Bloomberg Markets’ magazine, a prestigious U.S. publication. Marion is the only Canadian to make that list. And he thinks the doomers and gloomers have their proverbial heads in the sand.
Marion explained his viewpoint by explaining how the housing market works. It is a simple story of supply and demand. Homes are the supply, people are the demand. Looking at Canada, in 2012 the population increased by 1.2 percent. That is higher than in the United States, which grew by 0.8 percent and the European Union which only grew 0.2 percent. Compare this to Japan which has seen its population decrease for the last six years.
So why is Canada’s population growth so much higher than elsewhere? Because Canada has jobs and jobs bring people. Canada has no problem attracting immigrants to fill those jobs, who made up over 60 percent of the population increase within 2012. Over half of those immigrants were between 20 and 44, in the prime of their working years and beginning to start families. All of these newcomers need a place to live. That means the rental vacancies go down, home sales go up, home inventory goes down and home prices go up.
Now Canada has certain areas where this trend is much more noticeable. Alberta is growing faster than the rest of the country because of the available jobs and strong economy. Housing prices are rising faster because of the demand of those immigrants moving in and taking those jobs. It’s not rocket science.
Marion doesn’t understand why the bubble bursters don’t take this into account before posting their latest gloomy diatribe. Stephen Poloz, governor of the Bank of Canada, sees things Marion’s way. In fact, he agrees with the assessment that the immigration and demographic trends across the country will continue for at least the next five years. Canada as a whole is expecting a four percent increase over the current numbers. Stellar province Alberta is expecting their increase to be six percent.
Much of Alberta’s success is due to the oil market. Canada’s exports to the United States have increased by 47 percent since 2006. OPEC’s imports to the USA decreased by 46 percent during that same time period. Canada now ships more oil product to the United States than OPEC, and that trend is expected to continue.