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Posthaste: Two things that will protect Canada from a 'full-blown housing crash'

·4 min read

Good Morning!

The big question about the housing correction now underway in Canada is how far will it go?

Home sales and prices are expected to fall further, but economists at RBC say they have identified forces in Canada’s economy that will protect the market from a “full-blown housing crash” as suffered by the United States during the 2008 financial crisis.

“Demographic demand for housing in Canada is strong — and it’s getting even stronger,” write RBC economists Robert Hogue and Carrie Freestone in a report this week.

So strong that RBC expects Canada will gain 730,000 households by 2024, compared to 2021 — 240,000 new households a year.

Two forces are at work here.

First, immigration. Over the past decade Canada’s population has grown over twice as fast as the average of its peer countries in the OECD. Ottawa’s target is to bring in a record 1.3 million new permanent residents by 2024 and that should add 555,000 new households, RBC estimates.

But there is another trend in our society that the economists say is often overlooked: the size of our households is shrinking.

Canadian households have been getting smaller for years. In 1851, the average was more than six people. That fell to 4.3 people by the early 1940s and to 2.4 in 2021.

Since 2016, one-person households have also become more common, so much so that almost 30% of Canadians now live alone. Seniors account for some of this, but the economists say a growing number of young Canadians are also opting to live alone and start their families later.

The size of households has a big impact on the number of housing units needed by Canadians, whether owned or rented, said the economists.

In the five years leading up to 2021, the average household size fell by 0.02 people. Even this small decline raised the number of households by 140,000 or almost 30,000 a year.

And the economists say these trends are gaining momentum. Though immigrants are more likely to live in multi-generational homes this has not offset the effect of shrinking households.

The number of multi-generational homes has risen by almost 80,000 over the past 10 years, about 5% of new households, while the number of one-person households accounted for 700,000 dwellings, 44% of household formation, they said.

“The bottom line: Together, immigration and shrinking households are among the forces that will bolster Canadian housing demand and protect against a full-blown housing crash,” said Hogue and Freestone.


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MODERN TRAGEDY From the beginning of this pandemic, some people who survived COVID-19 have suffered from an array of symptoms that lingered for months — including headaches, fatigue and brain fog. Surveys have shown that anywhere from 10 to 30 per cent of COVID survivors suffer from long COVID, meaning that five per cent of Canada’s workforce may already be affected. The Financial Post’s Gabriel Friedman talks to an expert on long COVID this week on the Down to Business podcast about how this disease is affecting our lives, our healthcare system and our economy. Photo by Getty Images


  • Public meeting on TD Bank Group’s proposed takeover of Memphis-based First Horizon Bank

  • Steven Guilbeault, minister of environment and climate change, will be making a nature announcement in Halifax in collaboration with the province of Nova Scotia

  • Dominic LeBlanc, minister of intergovernmental affairs, infrastructure and communities; Gary Crossman, New Brunswick minister of environment and climate change and minister responsible for the Regional Development Corporation; and Maxime Bourgeois, mayor of Memramcook, will make an infrastructure annoucement

  • Jessica Bell, Ontario NDP housing critic and MPP for University-Rosedale, will hold a press conference introducing her bill to eliminate money laundering in housing

  • Today’s Data: Canadian industrial product and raw materials price indices, and Teranet/National Bank home price index; U.S. initial jobless claims and existing home sales







G7 nations held up pretty well in the second quarter, despite all the recession warnings out there, points out BMO senior economist Jennifer Lee with the chart below. The U.S. surprised with its second contraction in a row, and Germany struggled with supply issues and the war in Ukraine. But France and Italy got a boost from tourism and the lifting of COVID restrictions helped Japan. Lee said Canada has yet to release it Q2 numbers but the recovery in travel, strong commodity prices and trade likely supported growth.

The second half of 2022 will be a different story, Lee said, with slower growth in North America because of central bank hikes and in Europe because of high energy prices and shortages.




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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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Listen to Down to Business for in-depth discussions and insights into the latest in Canadian business, available wherever you get your podcasts. Check out the latest episode below: