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Canada: Why Are Home Prices Outperforming The OECD?

ByThe National Bank of Canada
Published 04/17/2012, 04:07 AM
Updated 05/14/2017, 06:45 AM

The media continues to point to Canada as one of the most extended markets in the world when it comes to home price appreciation since 2007. As today’s Hot Chart shows, Canadian housing prices have surged 18.2% after adjusting for inflation over this period. Though rock bottom interest rates (real interest rates are actually negative) and decent job creation have certainly played an important role in supporting our market, Canada was not alone in that situation.

So why have our home prices outperformed the rest of the OECD by so much? The answer lies with demographics. The growth rate for the population group aged 20-to-44 is particularly important for the housing market since this is the age cohort generally associated with marginal demand for a residential asset (rent or buy). As it turns out, Canada really stands out from the rest of the OECD when it comes down to favourable demographic trends for housing.

As shown, after a period of stagnation since the mid 1990s, population growth for people aged 20-44 has picked up very notably since 2007. Importantly, even if the rate of growth is expected to crest in 2013, it will still remain positive over the next decade. This argues against precipitous fall in home prices.
Canada Why are home prices outperforming the OECD

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