The week that was; Economics is all about "demand and demand"; Sherry Cooper sees positive demographic trends?
OCTOBER 14, 2011
What a week!
The risk trade has been firmly re-established this week as positive data poured out of the US and Canada. It seems for now that Canada will likely avoid a technical recession in Q3 (probably a 75% likelihood), while the US seems more likely to narrowly avoid one later this year (I’d put the odds of the US avoiding a recession at 60%). Despite the ECRI last week saying that a recession is a ‘done deal’, the most recent economic data certainly suggests that there may be some hope on that front. However, leading indicators are still signalling a slowdown, so it will be interesting to see how things play out.
The Canadian dollar has rallied back to $0.99 to the greenback while oil has shot back up to $87/barrel after hitting $75 two weeks ago. The TSX has rallied hard on this bounce, with the energy sector surging 8% on the week. The TSX itself finished the week up 4% and is now down less than 3% on the year.
All of this happened despite no real solution coming out of Europe. Yes, the stability fund has been expanded, though it still has massive hurdles to clear. Bond yields are moving higher, with French spreads over German bunds reaching new highs, Spanish and Italian bonds again showing signs of stress, and Greek one year bonds surging to 170% (that’s no typo). The only lasting solution to the Greek drama is finally on the table as the EU is mulling over a 30-50% write down of Greek debt. While the proposal suggests that the EU can somehow backstop the banks, which would otherwise take major capital losses on such a move, I have a hard time seeing how there could not be a complete riot over that decision: “We know your pension just took a massive hit from the Greek write down, but don’t worry, the government is here to backstop the banks with your tax dollars so they don’t have to take a similar loss.” Sounds reasonable. How could it not go well?
Meanwhile in China, the data continues to suggest that the risk of a hard landing is increasing. Copper, which economists like to say has a ‘PhD’ in economics, is still reeling, despite a nice rebound today.
It’s been a nice week for investors, though I’m certain there are still major economic issues to contend with on the domestic and international front. Enjoy the bounce, but don’t expect the volatility to be over.
We all know that economics is about demand and demand:
At least that’s what you’d think listening to some of the housing bulls. Those who actually understand economics recognize that it’s actually all about SUPPLY and demand. I hate having to rehash old posts, but sometimes it’s necessary to drill the point home. Consider this gem of a comment from earlier today regarding the Toronto condo market:
“If you want solid data, look at immigration, roughly 90.000 new Canadians settle in the GTA every year. And as far as I know, they don't bring their own tents, they rent or buy condos until they can afford a house. That's is called demand. And yes, there is a RE bubble and it can burst in 20 years from now when prices in TO reach $1.000.000/unit.”
There you have it. There’s demand, therefore, price rises. And because there is demand, prices are justified at any level relative to incomes, economic growth, rents, inflation, etc. It's all about demand, baby!
Not quite. There is one sentence in this particular comment that should catch our eye: “they (immigrants) rent or buy condos until they can afford a house.” True. In every sense. Some rent and some buy. So the next logical question is, why haven’t rents come anywhere close to pacing the rise in condo or house prices?
If the argument holds water, and if there is such a massive increase in immigration that our building industry can’t keep up, shouldn’t that exert pressure on house/condo prices and rents as well? After all, the same dwelling would be in demand by owners and renters, meaning that yes, the sale price would be higher, but so too would the rent. It certainly hasn't been the case (see yesterday's post), and that should cause us to question what's really driving this market.
But even that’s getting ahead of ourselves. We still are making the massive assumption that the rise in population has been so extreme that it has outstripped the ability of the construction industry to keep up. Is that even true?
Let’s not speculate. Here’s the truth: The population growth rate in Toronto is 2.4%. There has been no ‘surge’ in population growth that can possibly account for house prices that have nearly doubled in 10 years.
Furthermore, if we look at housing starts and compare them to the increase in total population (which includes net migration and net ‘organic’ growth), we find that Toronto has built an average of 1 new dwelling for every 2.5 new people added to the city over the past decade. Not much of a housing shortage. This in no way justifies the pace of house price appreciation. This increase is right in line with the long-term average, again begging the question of what has really moved this market. Take the blinders off! Turn over a few more rocks.
Pretty hard to say that the increase in house prices has been due to demand...at least not without taking a serious look at the supply side.
For a more detailed analysis of the ‘population growth drives house prices’ fallacy, check out these two posts:
The superficial appeal of the ‘population drives house price’ story: Does it hold water?
The ‘population drives house price’ story: Still leaking like a sieve
“Canada boasts a positive demographic situation” for real estate? Did Sherry Cooper really just say that?
It appears she did in a research note from BMO Capital Markets titled, “US and Canadian housing markets supported by demographic trends.”
Key quotes:
“Demographics will help (the US housing market). Housing starts have been running at about half the pace of household formation for almost 3 years and the number of household formations has been depressed by the weak economy and is starting to edge upward. The overall U.S. population has grown by 7% over the past five years; and, over the next five years, the number of 20-to-34-year olds will increase by 4%. These first-time homebuyers will be the big winners in the home sweepstakes where home affordability will be the highest in decades.
This is a far better situation than in most of Europe or Japan where the population is growing minimally and the number of young adults is plummeting. Canada boasts a similar positive demographic situation to the U.S., which should keep our housing markets simmering as well. To be sure, the aging boomers will be downsizing; but, for many that means moving into pricey condominiums that cost more per square foot than the homes they sell.”
I’m no genius, but it seems to me that demographics are decidedly against us. We know that the strongest buying of real estate is in the 25-35 age group, beginning at age 25, while people become net sellers of real estate after the age of 65. It doesn’t take a rocket scientist to see why this is somewhat problematic:
Latest estimates from an RBC poll suggest that nearly 60 percent of near-retirees plan on at least partially funding their retirement through existing home equity. That may take the form of downsizing, selling and renting, or the use of a reverse mortgage, but the reality is that there will be some portion of current homeowners in that age cohort looking to lock in these gains by selling and downsizing. There’s one small problem that is nicely captured in the above graph, but brilliantly explained in a 1998 paper by the US Fed:
"In an economy with a stable age distribution, this would have no effect on capital markets. When each cohort reached retirement age, it would sell its assets to younger cohorts who were accumulating wealth, and with steady population growth there would always be enough of the latter to absorb the sales of the former.
But what happens when population growth isn't steady and the economy's age distribution isn't stable? In particular, what happens when the old-age dependency ratio rises, and there are proportionally fewer young savers to buy up the assets of the older retirees? In this case, by the law of supply and demand, one would expect the price of assets to fall.
As aging baby boomers begin to sell their financial assets, they will presumably be selling to the next waves of savers, the so-called Generation Xers and Yers, which are significantly smaller population cohorts. With relatively fewer buyers than in the past, boomers may find themselves selling into a weak market when they retire."
And to further drive home the point, a recent article in the Journal of the American Planning Association summed it up as follows:
What have not been recognized to date are the grave impacts of the growing age imbalance in the housing market.
If the elderly are more often home sellers, and are more numerous than the young who are buyers, a market shift could come on quickly after 2010, causing housing prices to fall. Even if prices remain flat, without the investment incentive young households will likely slow their entry into homeownership, worsening the imbalance between sellers and buyers.
Once past the tipping point, market adjustments will cascade in virtually every community, as the ratio of seniors to working age adults will increase for the greater part of two decades.
It certainly looks like the current demographic situation is ‘positive’ and ‘supportive’ for sales of Depends and Viagra. Housing....not so much.
-Ben
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28 Comments
Another thing to add - when you look at the net buyers (age group = 25 to 35), there isn't as much fuel compared to the past because this age group home ownership has also increased since 2000. Maybe it's close to 50% now?
I was looking at the chart from Petr's post again. It doesn't suggest that boomer selling will be that significant in the next 10 years. The difference between the 55-64 and the 65-74 is small and suggests that most hold on to their home after 65. 75+ is a more significant change but much smaller population
The demand side is quite different, the ownership rate jumps a lot from the 20-34 group to the 35-54 group. At the same time, it looks like the supply of new 30-35 year olds will increase over the next 10 years before it starts to really drop off.
Looking at the 'Canada population by age' chart, it looks like it will be more like 20 years before demographic effects hit full force. What am I missing in the way I looked at this?
The ownership vs. age is from here:
http://www.theeconomicanalyst.com/content/revisiting-demographics-anothe...
From this chart http://i.imgur.com/KM3o6.jpg it looks like the difference between the 55-64 and 65-74 is quite large. The USC study states the crossover to net selling is 64. But I suppose Canadians could behave somewhat differently than Americans. However it looks like we just lag their age pyramid a few years. Maybe their WWII soldiers got down to business quicker.
My concern with the demand side is the steep drop off over the next 10 years of 20 year-olds. If vacancy rates climb due to falling supply of renters, then falling rents could spill over into home prices.
Life expectancy of average Canadians is 81.2 years of age. Some will die 10 years before and some will die 10 years after, or 5, or 20 after or whatever.... The death of an individual in the 75+ category will not affect home ownership rates. It will increase supply with another house on the market but will not affect home ownership rates. A dead person does not count as a statistic.
Many in the 55+ category choose to downsize their home. This may have effects on supply and on demand but I'd say more on supply. I know a lot of older folks choosing to build a smaller home, so that adds one house to RE market.
One thing for certain is that many youths have entered home ownership at an earlier age. There won't be as many young people buying homes because compared to the past, this rate is already at an increased level.
I'd say demographics is on the bears side.
"Yes, the stability fund has been expanded, though it still has massive hurdles to clear."
More like a mountain that needs to be moved. The EFSF was approved for allowing 440 billion to be injected and allocated to Greece's debts. The real problem now is that policy makers must expand the 440 billion to 2 trillion dollars in order to ring-fence contagion banks. Unfortunately, the German Bundestag has already stated that in order for Germany to commit to an expansion of the EFSF, Germany would have to call a referendum vote. Surveys show that 65% of Germans oppose the expansion. This is a major event to watch out for in the coming weeks.
"There you have it. There’s demand, therefore, price rises. And because there is demand, prices are justified at any level relative to incomes, economic growth, rents, inflation, etc. It's all about demand, baby! "
Actually Ben the dynamics of economics have changed to supply, demand and speculation. It's important to remember that modern finance (courtesy of digital) has created a third party that speculates between supply and demand (a derivative) that effects prices.
Population & Immigration
Here I make my case again that it is not the population growth, rather it is the increase of 'flow' or 'traffic' within the population that causes more activity in the housing sector. This can be seen in this chart as net migration (movement) has been growing more then the natural increase of population. Ontario http://i53.tinypic.com/2wq66wx.jpg
So how does this effect home prices? The majority of immigrants are foreign workers and students who (many) on average would stay and rent for a duration of 3-5 years, more or less while some may also stay permanently later on. The growing cycle of net migration increases the frequency of rent demand (3-5 years) as opposed to buyers who would live in the their homes for a longer period of time. This creates more activity in the market place and gives home owners more resale opportunities to other investors or speculators. If new housing starts have not kept up with demand (shown in low vacancy rates), the next logical assumption is that the resale market has been rotating (adapting) inline with migrating immigrants and local demand. If the resale market is more active, bidding occurs more frequently (years) on the same property that would carry-forward appreciation to the next investor.
Why would rent not go up with home prices? The reason why rent hasn't increased parallel to home prices is because the allowable rent guideline increase has been lagging (many years) by misreported inflation data. This is not a conspiracy about CPI suppression as this topic is being widely discussed amongst top economists, investors and institutions that have openly admitted that the inflation formulas (Boskin Commission) used by stats agencies does not represent or trend with real prices. There is no question that if the rent guideline followed accurate CPI measurements, house prices would have never reached their current value as rent would have become unaffordable.
In the state of the current rental market, I believe landlords are feeling the mismatch of rent prices compared to mortgage payments, maintenance fees and servicing costs--this is forcing them to raise the rent beyond the allowable rate increase.
"We know that the strongest buying of real estate is in the 25-35 age group, beginning at age 25, while people become net sellers of real estate after the age of 65."
There is a 'major' issue amongst the age group below 25 that isn't discussed much--student loan debt. This year the average debt per student reached a record $24,000 and tuition fees are going up faster then CPI http://www.statcan.gc.ca/daily-quotidien/110916/dq110916b-eng.htm
Now just imagine what's going to happen when these kids come out of school with no jobs and are already 24k in the hole. Do ya' think they'll want a mortgage right away?
Man, Canada has some serious issues to deal with.
Greg - you are correct about rents and the allowable rent guideline increase. When people move out of apartments, the landlord is rubbing his hands in glee. "Oh, boy, I'll paint the place and jack up the price." But for the people who end up renting for the long-term (which many do), their rents do not go up in proportion to the house price increases. In fact, they barely move at all, not because the landlord is trying to be nice, but because he has to follow the guidelines.
And you are also correct, Greg, that CPI is way, way too low. I've heard it's because pensions are indexed and they don't want to have to pay more out to the old age pensioners.
Re foreign students: a lady was telling me that she moved out of her apartment (they all had to leave) after the whole building was bought by Asian immigrants. They are gutting the one and two-bedroom suites and making them into dormitories for Asian students. A whole bunch of people just lost their accommodation and had to go elsewhere, which puts upward pressure on prices.
Re student debt in the States: "We are now to the point where one trillion dollars in student loans are outstanding. Put bluntly, we are literally, as a nation, as politicians and more importantly as parents, screwing our kids blind in order to find just one more hit of debt crack in the carpet fibers of our economy!" $1 TRILLION in student loans in the States and no jobs to go to. Yeah, they're going to be buying houses real soon (not).
Supply, demand and speculation - love it! Sums it up nicely. Yeah, the copper price is all "demand" (LOL).
The EFSF at $440 billion would have worked while Italy and Spain were still creditor countries, but now they're debtor countries and have to be rescued. They had to up the amount. Can't have those precious banks -- I mean bondholders -- take a hit. Oh, no, we'll just shove the debt onto the taxpayers.
"Actually Ben the dynamics of economics have changed to supply, demand and speculation."
Perhaps I'm old school , but when I got my degree in economics (1996) supply and demand included speculation.
That would have been three years prior to when the beast was let out of the cage, that is, the repeal of Glass Steagall. The repeal of this act allowed banks to speculate with customers deposits and leverage the market xxx times over physical supply . As an example, last year Goldman Sachs purchased 80% of the world's copper supply and later dumped it on the market as we've seen in the past few months. What percent of fundamental or speculative demand would that be? You can see how the beast has taken control between real supply and demand, it would be misleading to not parse the two in any analysis. BTW, copper was my best trade this year:)
I always get a good laugh when I watch recent Harvard lectures where professors openly admit that students are learning a broken financial system and are wasting their time and money. The world of finance and economics is now being made-up as we go. That's sad.
Great article here: http://www.ctv.ca/generic/generated/static/business/article2202027.html
"This was an unlikely group of student radicals, whose degrees could be expected to lead them to lucrative careers in finance, business or government if they didn't rock the boat. Instead, they protested – not about tuition or workloads, but that too much of what they studied bore no relation to what was happening outside the classroom walls."
Oh and about those two nobel prize winning economists, I guess nobody figured out that they modeled an algorithm (VAR) to be used by the banks high frequency traders.
We award them, we praise them, then they screw everybody. What a lovely world we live in.
It's hard to say, but there may be some 'life in her yet'.
Real estate in the GTA is in the sweet-spot, baby!
Pony up now, or be a 'sap' in two years.
Your choice.
So a fresh 25 year old out of 4 years of University with $40K of student loans and probably $10K of credit card debt is ready to step up and buy a $400K condo in Vancouver. I thought the 25-35 year olds are called the NINJA generation. No income, no jobs/assets.
One thing they do not teach in schools is consumer credit management, but there sure are lots of sales pitches to get you to sign up for easy credit.
Once more the main stream media/analyst BMO analyst perpetuating the credit bubble. Shame on them.
oops I forgot BMO makes money from perpetuating debt.
One common characteristic about real estate collapses is that people LEAVE that area. They don't immigrate they LEAVE!! Jobs related to construction contract, business opps dry up and people follow. The condos don't go anywhere. Also, where are the jobs in our economy to support all these $500k properties? At some point the Ont govt will have to go on a diet, my guess after the real estate market starts to dry up. So real estate and govt jobs contracting...
Vince - there are no jobs in our economy to support all these $500k properties, and all these $1000k properties that we have in Vancouver - but may be there are these jobs in the country next door overseas?
We still do not know the facts - what number of the properties are being purchased by the international (not local) buyers. These are the key facts in relation to a bubble question - if the properties prices rise caused by the local investors, there are no underlying incomes to support it in the long run and it is going to burst (and Ben is correct), but if the cause is the massive investment of the foreign money, they can last for quite awhile at least until the China's economy is growing as even at the slower growth rate they are able to produce massive amounts of the millionaires.
We might greatly underestimate the amount of the cash brought it from China to invest in Canada and the number of the people that might get involved if some idea gets popularity there - their surplus is spilling all over the world, that may explain some detachment between the prices rising at least in Toronto but the new mortgages amounts issued by the banks falling - when properties are bought for cash.
What happens to a country if a significant part of its RE (mostly condos) is being held by the investors (versus owners living there) for a rent (many of them consider it a long term investment and are fine with the initial losses, at least for now)?
Really - nothing, there are countries with the very low ownership rates in Europe and most people rent there, without obvious tensions in these countries. People just change their attitude toward the homes ownership. Or move somewhere, if you can. And the country changes irreversibly.
It looks like our government can not invent anything else to support the economy except to sell our resources, homes and quality of life to China. The question is how long are they going to be able to buy us - as we are getting poorer and they make less money on selling their cheap goods to us, it is a feedback loop.
Olga, Mainland China has 535,000 millionaires. Of course every single one of those 535,000 millionaires will buy a house in Vancouver or a condo in Toronto. Book it.
http://www.china.org.cn/business/2011-10/13/content_23617783.htm
The tide may start to turn in China. There has been a string of "disappearances" of factory owners due to indebtedness from over-expansion and speculation on, among other things, real estate.
http://www.alsosprachanalyst.com/economy/meanwhile-a-boss-in-shenzhen-ha...
Agreed. The only reason that I can see the market being so strong is that people assume a 100% probability of home price appreciation and therefore will beg borrow or steal to get a property. The govt aided and abbeded this notion when they artificially juiced the real esate market in the 08 financial collapse. It reinforced a bubble psychology. Much like Greenspan did in 1998 to support stocks. He cut interest rates with a 4% unemployment rate! We will only know after the crash just what type of schemes were being done to spur the bubble.
My intuition is that Viagra sales will probably track the RE "wealth effect" pretty closely.
Depends diapers will be much in need especially when people like Appraiser realize their house is dropping in price. He'll be crapping his pants for days and having nightmares of all the advice Ben gave him.
@ Petr
I wonder how many "depends" that stock market investors went through in the past two months?
Here is something for all of the population prognosticators to consider:
The rate of home ownership is approximately 70% in Canada. This rate has been increasing at roughly 0.25 % per year. In ten years the home ownership rate could be 72.5%.
How will an increasing home ownership rate affect supply and demand?
Appraiser - so why are we making that assumption? A simple extrapolation like that is a kindergarten thing to do.
I think we should look at countries similar to ours and look at what home ownership rates they topped out at? United States is the first country that comes to mind... What was their home ownership rate before their economy capsized?
70% represents what I call 'The Last Fool Index' that is comprised of the last speculators wiling to invest in other speculators. Even an investor who is purchasing a property for living purposes is a de facto speculator (without knowing so) in an overpriced housing market. We've already seen on this blog that there are people who still embrace low interest rates and consider it 'free money.' As long as there is someone willing to lend to another fool willing to borrow, the game can go on, but not forever.
In other news...
As I expected, the bond vigilantes and hedge fund hyenas have Canadian banks on their radar screen. http://www.theglobeandmail.com/globe-investor/hedge-funds-take-aim-at-ca... and once they figure out that the top five banks hold the highest exposure to CMHC mortgage backed securities, I'm sure they'll double or triple down on credit default swaps. http://i52.tinypic.com/2ag0o6g.png
Time to go inverted ETFs. http://i56.tinypic.com/v74ody.png
Analogy is not analysis.
Constantly referring to the U.S. situation is getting older and more incorrect as the years pass by.
Are you suggesting that it was the rate of home ownership that somehow "caused" the U.S. market to tumble? Talk about kindergarten logic.
What is the magic number that represents the limit on the percentage of home ownership? Is there a limit? Why?
"Is there a limit?"
Of course there is. I think we'd agree that the MAXIMUM sustainable home ownership rate is the 100% minus the percentage of the population living below the poverty line. In reality, it's well below that given lifestyle choices, etc, but clearly there is a concrete upper boundary.
And by the way, if we use the last 10 years, ownership rates have risen by 0.6% annually. If the boom times are to continue, you would need a comparable rise in the future. Good luck.
Ben, the home ownership rate is the 100% minus not only the percentage of the population living below the poverty line but also the people with an income that are not going to be approved for any type of mortgage if the prices stay that high. If we assume that the most buyers are local, many of them have less than 85K or 96K Household Income Required to get approved for the 500K mortgage with 20 or 10% down, which is very effectively phases out most of the perspective local buyers at the today's market, not only the people living below the poverty line. I really do not know who are these people in big numbers that are getting approved for the mortgage at the today's RE market.
Indeed Appraiser, what is the limit of home ownership and what is the magic number? There is good evidence that suggests the high rate of home ownership in the US was partially responsible for the failure of the market.
They simply ran out of fresh buyers during a period of easy credit and the potential to lift prices further evaporated as first-timers rapidly declined. Too much credit was given in too short a period of time and demand was pulled forward to the extent that a failure in the demand side metric was all but guaranteed.
This cannot be the whole story though as we know ownership rates went much higher in other countries.
In Singapore, for example, family ownership percentages currently exceed 87%! Jet on over to Spain or Italy and you will find ownership is at the nosebleed levels of 78% while poor little Ireland had (at its peak) an incredible rate of 83%.
So sure, we could go higher in Canada. We are not like those credit-obsessed, drunk on easy money Yanks after all. Oh no. We are Canuck's my friend. Lilly white. Snow-driven virginal bunnies with fat wallets and the temperament of cold climate polar bears. We shun risk but willingly embrace the heights of real estate Armageddon.
Who could have known, Eh? We really are the true North, strong and free.
Studies meanwhile have proven that high home ownership rates combined with escalating ownership costs reduce fertility and thus constrict family formation.
This is almost a taboo subject in our media.
Rarely do we encounter stories that address the difficulties of young newlyweds to form families in the face of high priced real estate. Why? Since when did the prospects of having children take a back seat to possessing property? Is talking about having kids a dirty subject all of a sudden? Are we sullied and soiled before the great God of housing now?
This whole exercise makes me sick to be honest. We have lost our way and now we are in decline as a society. Much like Europe with their massive population of aging people heading into their twilight years, we face entering the next two decades with no offspring of our own.
Lucky us. Granite became the placebo for family values and that natural outcome (little people), those that might surround us and support us as we aged, have become a rarity. We sacrificed family for the desire to meet social and parental expectations. We sold out our own futures in the rush to "own" instead of thinking clearly about why we even exist on this planet in the first place.
And now, we are entirely dependent on newcomers from other countries to make up the difference. Let them have the children. We don't want kids here. Those dirty little scrubbers will ruin our counter-tops, stink up our oak staircase or maybe pee down the hot air vents when the nanny is sleeping.
God forbid!
Have a look at an excerpt from a research paper out of the University of Amsterdam (2006) on the topic of family formation and high real estate prices. It is an eye opener. Why does our media not cover this topic? Why is Federal policy on home ownership put ahead of fertility rates in the Western world?
Does anyone know?
---------------------------------------------------------------------------------------
C.H Mulder, University of Amsterdam....
"In Western countries, family formation and the home-ownership of households are closely connected. It has repeatedly been found, for example, that the transition to first-time home-ownership is frequently synchronized with marriage, is often made in anticipation of parenthood, and is rare among singles.
From most research on the transition to home-ownership, one gets the impression that the association between family formation and home-ownership is positive. Home-ownership is strongly associated with marriage and, in some countries, family formation also seems to speed up the process of acquiring a home.
At the same time, it has also been found that home-ownership speeds up the transition to parenthood in West Germany. In the literature, however, it has also been argued that there might be a negative association between home-ownership and family formation at the individual or household level.
The cost of home-ownership might compete with the cost of rearing children....The countries in Europe with the highest levels of home-ownership (Italy, Greece and Spain at over 75%) are also those with the latest timing of...partnership formation and parenthood and with the lowest fertility.
This finding suggests that a high level of home-ownership might lead to difficulties for young people to...form partnerships and families".
---------------------------------------
From Wiki: Home ownership rates as of 2002 up to and including the present.
http://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate
Article extract was courtesy of C.H.Mulder, Planning and International Development Studies, University of Amsterdam. 2006.
Currently, an income inequality measure known as the low income cut-off published by Statistics Canada is frequently used as a poverty rate and is 10.8% as of 2005.
The Fraser Institute, a conservative think-tank, alleges that the federal Canadian government exaggerates poverty rates, and publishes their own measure, known as the basic needs poverty measure. According to this measure, poverty has declined significantly over the past 60 years and is 4.9% as of 2004.
If it is true that poverty rates are declining constantly, as alleged by the Fraser Institute, then there appears to be room for the home ownership rate to rise constantly over time as well. To what limit, who knows?
At 0.6% increase annually, that would bring us to a 73% home ownership rate in 5 years. I don't see any reason why that is not a reasonable possibilty.
Appraiser - do really you think that poverty rates are equal to the rates of the people unable to buy the RE property? What is the max income the Fraser Institute uses as a cut off for the poverty folks now, do they include the housing in the necessities basket? Can you please post a link to the source?
I think I made my point in the previous commentary, Appraiser. High home ownership rates come with a big price tag. If we are prepared to pay it we must also accept low and declining fertility rates.
The Western world is already in decline.
Now our populations are at risk too. Is that the price we are really prepared to pay in order for our aging population to enjoy a good retirement? It should be obvious to you that there is a direct connection between the shrinking family size and the standard of living enjoyed by our elderly populations.
I really hate to say it, but old people really stink. Spoiled, entitled and socially destructive. They win right up to the very end and everyone else pays the bloody price of their selfishness and lack of charity.
Did I mention yet that they suck?