The Canadian property bubble is at the point where it’s about to produce brain drain. At least in Ontario. Abacus Data conducted a survey on housing perceptions recently. The survey, commissioned by OREA, produced dozens of insights showing a public frustrated by a property bubble. Buried amongst those insights though was a big standout — a third of Ontario wants out.
Such a large rate of people considering a move is already problematic, but it gets worse. The rate is way higher for young adults, with nearly half considering the move. Typically not a problem for Canada, which uses immigration to smooth demographic issues. That may not be all that effective next time, with half of the province’s new immigrants also wanting out.
Nearly Half of Ontario’s Youth Consider Moving, And Over A Third of Early Career Adults Might Join Them
Over a quarter of Ontario has considered moving to a new province over the past year. The survey found 27% of adults in Ontario have considered moving from the province in the past year. That’s bad enough, but the rate keeps climbing as you look at younger and younger demographics.
Breaking down the stat by age, young adults are more likely to want to move from the province. OREA found 45% of people between the ages of 18 to 29 have considered moving to another province in the past year. The ratio falls slightly for those between the ages of 30 and 44, where 39% of people considered a move. People at this age are supposed to be the most optimistic about their careers. In Ontario, they’re more worried about finding stable shelter.
Ontario Residents Considering Moving To Another Province
The percent of Ontario residents considering a move to another province, grouped by demographic age.
Source: OREA; Abacus Data; Better Dwelling.
Provincial Drain Is Quickly Becoming A Very Large Risk
Young adults considering fleeing, especially at this rate, is very problematic. When home prices consume the economy, it tends to impact both affordability and jobs. The only people really happy are the existing owners. They have a hard time understanding why the rest of the market isn’t having the time of their life.
As for the rest of the market, they become extremely frustrated. If they’re struggling to afford basics, with a low quality of life, they wonder why they’re there. They can either pony up the premium, and support the market, leave, or wait out a correction. Waiting takes a long time, and it may be prohibitive to support the market. That leaves only one option for many — leave.
It’s a very expensive problem for the province to have young adults leave. Places like Ontario (and the rest of Canada) spend a lot to educate and produce top notch talent. They do it to produce high-value contributors to future society. Apparently, before the economy became dependent on real estate, we used to plan for stuff like this.
Now when the person you invested in doesn’t see a future for themselves, they leave. The human capital stock you spent a whack of resources on takes that investment and deploys it in a new region. The reallocation is technically called human capital migration. It’s often called “brain drain,” and it happens when there’s a human and financial capital mismatch. Real estate bubbles tend to be a common example seen around most of the world.
The expensive person you just produced? Well, now they’re moving to a region that paid nothing to get top-notch talent. All they had to do was have a decent current job opening, and cheap housing. In 2021, they don’t even need the job, since they can take their big-city job with them remotely. A minor improvement in value proposition could attract massive investment from a region.
Yo, Your Human Capital Stock Is Fleeing
Human capital goes where it’s treated best, as it should. At least the level that’s skilled enough to be considered mobile. Experts see it as causing a permanent reduction of income and growth in the region they’re leaving. That growth gets reallocated to the new region, along with decades of new spending.
Usually, this is thought of as a national issue, where people immigrate to another country. Like in the early 90s with Toronto hemorrhaging talent to the US. However, it also happens domestically, like that time Atlantic Canada bled young adults to Alberta during the oil boom. Ultimately, talent has options. Youth is talent before it’s even trained.
Almost Half of New Immigrants Want Out of Ontario As Well
Canada’s national anthem might as well have been replaced with the phrase, “we’ll just get more immigrants.” Every time there’s a problem, it appears to be the solution for the country. People don’t want to work for a donut chain for slightly above minimum wage? Immigration can solve that.
The tax base isn’t large enough to cover the amount of spending a government has done? Let’s get more immigrants.
Pensions are underfunded? More immigrants. Home sales soft? Immigrants. You get the idea, but that’s a good amount of the national strategy in Canada. If Ontario loses some of its human capital stock, it can replace them with imports of similar quality. Yes, there’s no way to not sound like a psychopath when you explain how a government thinks.
Importing people may not be the bulletproof strategy it once was in this bubble. The same survey found 46% of Ontario’s new immigrants are considering moving to a new province. A similar situation is happening in BC. It turns out immigrants are looking for an improvement in quality of life. Not a different type of exploitation. Who would have thought?
Now there is a lot more to Canada than Ontario and BC, but the two provinces are major hubs for talent. As markets like Toronto and Vancouver become less viable for young adults, it risks producing systemic market failure. Kicking the legs out of the economy tends to produce a spillover effect into other regions.
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