Canada printed yet another massive, immigration-driven quarter of population growth. What housing crisis, the country just needs to build homes faster, right? BMO Capital Markets crunched the numbers to show just how comically distorted and unviable growth has become. It’s starting to become clear the plan isn’t to diversify the country, but stimulate home prices and validate a real estate bubble.
Canada’s Population Added 430k In Q3, 1.25 Million In The Past Year
Canada’s astronomical population growth continues, driven almost entirely by immigration. The population rose 430.6k people in the three months ending Oct 1st. It’s the third-largest quarterly increase on record, and brought annual growth to 3.2% (+1.25 million). In raw numbers, a 12-month period has never seen more people added. The annual growth rate is the strongest since 1958, when the population was considerably smaller.
If you’re wondering how this is sustainable, it’s not. This is what annual growth looks like these days.
Canadian Population Change
Canada’s annual change in population.
Source: BMO, Statistics Canada, Haver.
“Now, in the context of Canada’s affordability crisis, take a look at the accompanying chart and ask if supply is really to blame here,” says BMO economist Robert Kavcic.
Adding, “Despite many commendable efforts, in no version of reality can housing supply respond to an almost overnight tripling in the run-rate of new bodies. This is (still) the case of a demand curve running loose.”
Canada Is Intentionally Trying To Overrun Its Supply Abilities
Up until a few months ago, BMO argued exuberance was the issue—supply has kept up with demand. Policymakers took that as a challenge, and began relying even further on immigration to overrun demand. Policymakers have adopted a failed Nixon-era supply-side narrative (a.k.a. trickle down economics), attempting to blame hurdles in the way of higher production.
Kavcic puts the current plan into perspective to show the type of scale required. “For additional context, at 2.5 people per household, we’d need more than 170k new units every three months at this rate of population growth, even before accounting for domestic household formation,” he explains.
The industry is currently pushed to the max trying to churn out 220k homes per year. That’s a significantly higher number than previous years, but still roughly a quarter of the amount that would be needed to accommodate the supply-side plan.
It’s easy to say, “we just need to build more houses.” However, demand for materials is already so high it’s inflationary. Trying to scale building, even if the skilled labor were available, would still require competing with global commodity markets for the materials needed, driving the cost of construction higher.
In essence, Canada has less of an immigration plan than it does a recipe for stimulating home prices. Fortunately, immigration balances itself out when it becomes clear the opportunities being promised don’t actually exist.
