I’ve been saying for years that real estate prices in Canada are not that high. Certain areas like Vancouver and Toronto have the perception of being unaffordable. But the fact that population growth is still positive in these major cities suggests otherwise. If these places weren’t affordable then people would be moving out of them, not in. 🙂
People from all the world have wants. These wants turn into demand, which fuels certain parts of the economy. And what do young adults want right now? According to an HSBC survey, the “vast majority” of millennials want to buy property.
Demand from Young People
HSBC bank polled 9,000 people from 9 different countries: Canada, Australia, China, France, Malaysia, Mexico, the UAE, the U.K. and the U.S. The results include some interesting numbers about the housing market among individuals between ages 18 and 35, which the bank defines as millennials.
37% of millennials said they had financial help from the bank of mom and dad to cover their housing costs. Canada is roughly in the middle of this trend.
A little over a third of Canadian millennials polled already owned their own home, and among those who didn’t, 82% say they intend to buy one within the next 5 years. Thus, housing must be relatively affordable, because even at the lowest earning stage of their careers, most people either already own property, or have the means to own in the foreseeable future. They are also willing to sacrifice a lot in order to become homeowners.
The results of the HSBC study shows that Canadian real estate may not be in a bubble. Funeral costs, health care costs, and tuition have also grown at a faster pace than inflation over the decades, but most people don’t label those sectors of the economy as becoming a bubble. So I don’t think housing is overpriced either.
Other asset classes like stocks and bonds are really expensive by historical measures right now, which gives investors an incentive to buy homes instead. Canada’s population is growing. But our land, especially in Vancouver, isn’t. Mortgage rates are still around record lows. The Canadian dollar has taken a beating over the last few years which means our properties have become cheaper to buy for foreigners. Our job market is pretty stable. And now we know that roughly 4 out of 5 millennials are looking to buy their first home in the next 5 years.
When we consider all those variables in context, it’s easy to understand why real estate keeps going up in value around here. 🙂 I believe buyers are paying the correct intrinsic value for their homes today. In order for there to be a housing correction, something has to change and we simply haven’t seen any major disruptive force in the market yet. That doesn’t mean prices will go up forever. But at least for now, it appears housing is still relatively affordable. 🙂
Random Useless Fact:
Most kitchen pans are made from either aluminum or stainless steel