Canada

Canada Completed 18 Homes Per Person Added To The Population Last Quarter

Canada’s population growth may have slowed, but new home completions are still moving at a breakneck speed. Canada Mortgage and Housing Corporation (CMHC) data shows developers delivered over 50,000 new homes in Q4 2020. The number of new homes began outpacing population growth in the prior quarter. The ratio went parabolic in the latest numbers though. Canada is now completing 18 homes per person added to the population.

Canada’s Population Growth Falls To Historic Low

Let’s start with Canada’s population growth, which just printed a new record low. The population is estimated at 38.0 million people at the end of Q4 2020. This is an increase of just 2,767 people from the previous quarter. Annual growth has fallen to 0.54%, a record low. Not just a recent record, but the rate of growth hasn’t been this low going back to at least 1946.

Canada Saw New Home Completions Surge 13%

The flood of housing that was under construction is still completing on time. There were 50,938 homes completed in Q4 2020, up 12.92% from the same quarter a year ago. This works out to ~7.12% higher than the median average for quarterly completions, over the past 10 years. It’s also the second most completed for Q4 since 2008, with 2018 being the year that beat it. As you may have figured out already, this is a lot more housing than the population has grown by. 

Canada Is Delivering Over 18 Homes Per Person of Population Growth

Housing completions reached a ridiculous multiple of population growth. Builders delivered 18.41 homes per person the population grew by in Q4 2020. This is up from the record set in the previous quarter of 2.26 homes per person. Over the past year, they delivered a home for every 9.5 people out of 10. Considering homes on average are occupied by 2.9 people in Canada, it’s a lot of housing.  

Canadian New Home Completions Per Person Added

The ratio of new homes completed to person added to Canada’s population.
Source: CMHC, Better Dwelling.

… But House Price Growth Is Accelerating?

The narrative has always been if you just build more, prices will start to catch up. That’s unfortunately an overly simple way to look at how home prices are established. If home prices fell with more development, why would anyone buy a new home from a homebuilder? Are they sacrificing themselves for the sake of the economy? Of course not, otherwise a developer wouldn’t have many sales.

The supply of an asset has a limited impact on prices. Liquidity and expectations are the biggest drivers of price movement. If no one has money to buy the asset from you, the price needs to drop until you find people that do. It doesn’t matter if your house is “worth” $1,000,000, if everyone only has $900,000 to buy it. When mortgage rates are lowered though, you give buyers an increase in budget. That extra credit means they’ll more easily absorb home price increases.

In a normal market, a borrowing frenzy slows naturally as people feel risk is higher than reward. However, The Bank of Canada and the Federal government broke the model with moral hazard. The public now largely believes the state will step in to prevent any drop in prices. It’s a lot of confidence in two organizations that investors are increasingly demanding risk premiums from.

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18 Comments

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  • Ethan Wu 2 months ago

    and price ACCELERATED in growth.

  • Trevor 2 months ago

    Those houses are already sold for the most part though.

    • Jason Chau 2 months ago

      and the housing those people moved from is now occupied by whom?

      “function of liquidity” means the flow isn’t optimized to be efficient.

  • Jon Silver 2 months ago

    Who cares? The excess supply will find a home quickly once mass immigration resumes. If it doesn’t resume for a few years and the market loses faith in it resuming, then we’ll have an interesting story.

    • Jason Chau 2 months ago

      You just said markets aren’t efficient, so technically it’s a big deal.

      as for “who cares?” apparently you do, since I see your username complain at the end of every article. If you think something has no value and dedicated your days to it, what does that say about the way you assess yourself?

      • Jon Silver 2 months ago

        I enjoy reading these articles and thinking critically about them — and most of them are quite poor articles that are worth derision. The intent seems to be to use cherry-picked statistics and facts to try to portray a bleaker picture than is realistic. In reality, we know that there is a temporary blip in mass immigration due to COVID, and hence it’s expected that we’d be completing more houses than growing the population during COVID.

        Believe me, I don’t dedicate my days to this site. I spend about 10 minutes a week on here. The articles are very simple to skim over and easy to see through.

        • Mortgage Guy 2 months ago

          I have serious doubts anyone that uses the term “mass immigration” can make any critical assessment on numbers. What’s mass? What’s the “normal” amount?

          Pseudo-intellectuals like yourself are exhausting. You attempt to tear things down because it helps with your low self esteem, but you don’t realize it just tells everyone you have no clue what you’re talking about.

    • Bob Walter 2 months ago

      And all new immigrants will have 1 million dollar to spend on a house because…
      New immigrants wages are typically lower than Canadians, as they do not have “Canadian” experience yet.

      Also of the class of immigrants that has this money to spend, there’s only a fraction that will choose Canada. How will Canada compete with the relaxed immigration policies of Joe Biden? Anyone with a pulse is welcome in the US now. What is Canada’s advantage? Jobs? Highest unemployment in the G7.

  • V 2 months ago

    Just the news I’ve been waiting to slow the acceleration of dumbfounded house prices. This year prices will fall. Too many houses being completed. Eventually the prices have to come down. Feel sorry for all the suckers who overpayed by 100k to 250k…..actually no I don’t……Suckers!

    • Zaheer Jilani 2 months ago

      Where will our children stand, who are from Middle Class even after having professional degrees from Universities, where they study for 4 to 6 years. Resulting in getting into heavy loans from banks.

    • Jon Silver 2 months ago

      Prices never have to come down. It seems more likely that the currency will be devalued rather than prices coming down (in which case the “suckers” who overpaid will actually come out ahead and the people who held cash will actually lose).

      I don’t like it any more than you do, but let’s not pretend there’s some big crash coming.

  • Trader Jim 2 months ago

    It’s the stock market at this point. Bad data is “temporary” and good data is good. This is the definition of a bubble.

  • Qualifiers? 2 months ago

    Am curious how exactly “person added to the population” is quantified. Does this include immigrants? Or is it new citizens only? What about workers here on visas – are they included or excluded from this?

    • Terrance Wang 2 months ago

      It’s population growth, which I assumed is the quarterly estimate subtracted by the previous estimate. It would appear I’m right.

      This would include immigration and permanent residents that are already in the country.

  • The Truth Shall Set You Free 2 months ago

    This has been the same since the early 2000s. When you factor in deaths in Canada as well as Canadians living/working in other countries the rate of completion has far outpaced the population growth so the idea that homes are priced based on low supply is ludicrous. That is why the analysts at BMO who were charged to come up with the reasoning behind Canada’s high prices in the end stated that Canadian’s pay more for their real estate cause they want to. Not even kidding was an article posted on this site maybe 3 weeks ago.

  • jcooper 2 months ago

    This article is slightly misleading. it should have included the breakdown of those homes. 60% of the completed homes were condos. there are a multiude of reasons why people would choose not to live in condo. there is still a signifcant supply issue for housing outside of the condo market.

    • Mortgage Guy 2 months ago

      I love when prices rise because there’s not enough housing, and then turn into condo aren’ts homes, even though prices are still rising for condos.

  • Peter J Ferris 2 months ago

    Does any politician or economist ever give any consideration to the idea that, for the sake of our environment and for the well-being of our own species, we may need less not more growth? Stabilization of population growth and per capita consumption will be needed if we are to reverse course and restore our natural ecosystems to a state of health.

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