It has Canadian flavours, but their boom is built with the same bones as ours.
Someone flicked me a kind of mind-blowing report on the Canadian housing market.
If you think the Aussie housing market is tight, have a look at what’s happening in Canada.
And if you think that the Aussie property market has no more room left to run, look at what’s happening in Canada!
The thing you’ll note here is that the exact same dynamics are playing out in both countries, it’s just a little more bonkers over in Canada.
So this is all from a report by the National Bank of Canada (a private bank, not a government agency.)
What they note is that the Canadian property market is buckling under the weight of a massive surge in immigration.
Canada added a completely unprecedented 1.25 million people to the population in 2023, completely dwarfing anything that came before it.
Canada’s population growth rate in 2023 was 3.2%, five times the OECD average.
This has created an epic housing shortage. Looking at the ratio of the working age population to housing starts, the deficit to required housing is massive.
There has been effectively little to no housing supply response. Housing starts are tracking along with historical averages.
NBC economists estimate that to keep pace with population flows, Canada needed to have built 480,000 units in 2022, and 725,000 units in 2023. These are huge and completely unrealistic numbers. Housing starts only came in at 241K and 263K units in those years, and the residential construction sector has never exceeded 274K units on an annual basis.
But with the housing shortage growing to epic proportions, rents obviously started to sky-rocket.
As this impulse feeds through into the inflation data, inflation is much higher than it would have been without the huge surge in immigration. In fact, if you take the shelter component out, inflation is already pretty much back to target.
Which is to say that in their view, Canadian interest rates have to stay higher for longer to make room for the extra immigration.
Now I think you’re starting to hear grumbles about this situation in Canada at the moment, but nobody really wants to talk about immigration.
Like here, if you start talking about immigration, someone is going to pop up out of the plant in your café and call you a racist.
Which is why you can get these massive immigration numbers with almost no public debate about what kind of numbers are ideal.
And that’s exactly what we’ve seen here in Australia too.
Our story hasn’t been quite as extreme as Canada’s, but the exact same dynamics are playing out.
I mean, what did people think was going to happen when we lifted immigration into a housing crisis?
Did anyone even ask the question?
The sad truth is that immigration is the lazy politician’s economic lever. More people = more GDP, and it’s much easier to create visas than to implement reform, or industry policy or tax policy.
And if it puts a rocket under house prices, that’s somebody else’s problem.
DB