Canada’s national statistics agency revealed a surprise in the latest Census drop. BMO Capital Markets found Canada’s housing stock has grown faster than its population. Robert Kavcic, a senior economist at BMO, pulled historic data and found this to be the case for two decades. The bank acknowledges long-term supply issues, but believes how much that is driving prices, is overstated. A speculative mindset that has accelerated with price growth is the primary driver.
Canadian Residential Real Estate Grew Faster Than Population
Canada’s residential count grew faster than the population. The latest census shows the population increased by 5.2% from 2016 to 2021. In contrast, the number of private residences grew by a mind-blowing 5.7% over the same period. “Not to poke the bear, but there was one curious fact in the 2021 census numbers,” says Kavcic immediately before poking the bear.
“In Ontario the total population count grew by a hefty 5.8% between 2016 and 2021. But, the private dwelling count in the province rose by an even stronger 6.2%,” he highlights. Ontario has seen population surge higher, but housing construction has moved even faster.
Other regions have seen price growth primarily concentrated in urban areas. In that case, one can argue it depends where the housing has been growing. That’s what makes the situation a little more curious in Ontario. The province is seeing prices rise everywhere, with limited inventory for sale. This isn’t a recent phenomenon, but the bank says supply has outrun the population for decades.
Canada Has Steadily Seen The Number of Dwellings Per Person Rise
BMO found Ontario’s housing stock grew faster than the population for two decades. “In fact the number of dwellings per person has been steadily rising over the census periods going back to 2001,” argues Kavcic.
Ontario Dwellings Per 1,000 People
Canada is now seeing the most housing delivered since the 70s, and that’s with supply chain delays. There’s much more coming in the not-so-distant future, especially in Ontario. “And, let’s remember that there is a record number of homes currently under construction too,” he adds.
Comparing Canada’s Housing To Older G7 Countries Is A Bad Take
Canada’s housing is often compared to its G7 peers, but that only works for some issues. Dwelling count isn’t one of those issues, according to the bank. BMO addressed the fact that Canada has the lowest housing stock per person in the G7, a point often made by the industry. Though this has been true for a while, prices have only begun to accelerate recently. The bank says this has to do with the age of Canada’s population.
“We really need to look at 18+ population, especially when making cross-country comparisons,” says Kavcic. Adding, “Canada is young versus the G7, so our housing stock per person should be lower… That data will come in the next census wave.”
BMO clarifies — they aren’t saying Canada doesn’t need more housing stock. The country needs to keep building to prevent a deficit, especially with fast-population growth. The soaring price growth is more of an issue of speculation exacerbated by the Bank of Canada (BoC).
“We acknowledge longer-term issues on the supply side, but the volume is much too high on that front. Meanwhile, speculative demand psychology keeps building,” ends the research note.
A few days ago, BMO estimated the excess demand created by the BoC’s excessively loose policy. The central bank’s policy drove billions in excess sales, creating more than usual demand. As rates rise, they see demand falling and inventory rising. After all, few people sell an asset while it’s soaring in price, especially if it’s tens of thousands per month. They see the inventory problem resolving very fast after interest rate hikes.