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But while people are anxious about an irrational bidding war and fear that the bubble will burst, it is fundamentally the growing imbalance between supply and demand that is driving house prices. Buyers want a big house, but the dream of owning a house is getting farther and farther away because there is not enough room to build houses in and around the main cities where people work.
In fact, there is actually not enough room in this country of the world’s second continental block, which brings Canada to the time of reckoning. The dream of owning a separate house and a piece of land has always been taken for granted by Canadians and an important factor in attracting new immigrants.
This may force people to extend the concept of housing to apartments and rentals, while changing the entire lifestyle of the middle class, from breadwinners to retirement savings.
Robert Hogg, an economist at Royal Bank of Canada, said: “compared with Europe, Japan or other parts of the world, the depletion of available land in Canada is a relatively new phenomenon. For future generations, for example, the possibility of owning a house will be about the same as in Europe.”
Buying a house has long been seen as the safest and most reliable way to reach the middle class in Canada, where Canadians generally live in the world’s largest houses and own a higher proportion of homes than in Britain, France or even the United States.
In and around Toronto, Montreal, Vancouver and Ottawa, nearly 60% of home sales last year were single-family homes, according to data compiled by Bloomberg News from the local real estate board. In these places, apartments account for only about 1/4 of sales.
But if you look at the construction of these cities and nearby satellite towns over the past decade, the percentage is reversed: 60% of new homes are apartments and only 25% are detached houses, according to government data compiled by Bloomberg. This mismatch forces desperate bidders to compete for increasingly scarce single-family homes. According to the data, Canada’s benchmark house prices rose by nearly 15% in 2020, second only to Luxembourg.
However, there seems to be no response from developers. Although new housing starts in urban areas of Canada hit a record in March, the proportion of detached houses actually fell to 19 per cent from 24 per cent the previous year, according to government data. Although the proportion improved in April, housing starts generally slowed that month.
Robert Kavich, an economist at the Bank of Montreal, said: “if there is a problem, it is the composition of new supply. We are no longer building single-family houses.” From a demographic point of view, detached houses happen to be the demand of the market, so we are a little stuck in this respect. ”
In the final analysis, it is the problem of land. Although Canada has a total area of about 10 million square kilometers (3.9 million square miles), about 40 times the size of the UK, most Canadians are concentrated in a few big cities not far from the US border, where jobs are concentrated.
Although the era of working from home has spread some people’s places of residence, and some quiet agricultural communities and weekend resorts have become the hottest real estate market in the country, even the possibility of returning to the office a few days a week, it also keeps most workers from living too far away.
The specific factors of the city further limit the use of land. Vancouver is squeezed between the Pacific Ocean and the mountains, and provincial laws banning urban expansion have effectively turned Toronto and Ottawa into islands, while Montreal is already an island.
