Recent article from Ozzie Jurock identifies the positive economic benefits and demand drivers that come from Canadian immigration. As suggested, global economic factors aside, the west coast of Canada will always be a popular place to live globally based on demographic trends alone. John Cooper
The Single Most Important Housing Trend? Immigration!
The single most important issue in Canadian housing, particularly in Vancouver and Toronto, is not interest rates, housing prices or the vagaries of consumer confidence. All of these pale in significance to the part that immigration plays in deciding home ownership and rental demand.
According to Statistics Canada, immigration represents close to 70% of Canada’s current population growth, up dramatically from just under 20% in 1976. Given today’s below-replacement fertility rates, within 25 years immigration will be the only source of net population growth, as deaths begin to outnumber births. In B.C. net international migration reached 47,600 in 2008 and is expected to top 54,000 this year, and will be clicking to over 62,000 per year by 2013.
The federal government is attempting to attract around 250,000 immigrants to Canada each year, and about 15% of these will make a home in the Vancouver area. In B.C. 90% of arriving immigrants settle in the Lower Mainland.
A fresh round of new studies into recent immigrants shows that they are the most active and committed buyers of housing – and will also dictate demand for all types of rental housing.
The most recent census data reveals that 72% of immigrants own their own homes, up from 68% in 2001. The biggest increase came among those living in Canada for less than 10 years, suggesting that immigrants are buying homes more quickly than ever before. Unlike in earlier decades, when newer immigrants struggled to gain a foothold, more immigrants now are involved in high-growth industries such as engineering, construction and skilled trades or are arriving as investors. That has helped the faster transition to home ownership.
According to Frank Clayton of Altus Group, the proportion of immigrants living in ownership accommodation rises quickly from 17% six months after arrival to 55% four years after arrival. Looking at it another way, at least 30% of the homes purchased in Vancouver and Toronto from 2001 to 2008 were bought by immigrants. These are truly astonishing numbers that reveal a desire to achieve ownership that is disproportional to the level of income of new immigrants. Surveys show a willingness to cut consumption in other areas in order to buy a house.
The immigration effect on housing is most pronounced in Vancouver, though it receives less immigrants each year than Montreal or Toronto. Sixty-per cent of investor-class immigrants to Canada settle in Vancouver and immigrants in the skilled worker class account for the largest number of immigrants to B.C. Also, B.C. gets the highest proportion of Asian immigrants – 22% come from China – the group which is by far, also the most likely to buy real estate.
According to BC Stats (www.bcstats.gov.bc.ca), 93% of all landed immigrants from Asia settle in the Vancouver region, as do nearly 90% of immigrants from anywhere else. Only 4% choose Victoria, the second most popular destination in the province. And the numbers coming to B.C. are huge. In the second quarter of this year alone, nearly 11,000 immigrants arrived in B.C. This is nearly equal to all of B.C. housing starts for the entire year. The impact of immigration on the B.C. housing market is far from even. Immigrants are more likely to buy condominiums than detached houses for example and the effect of this is far more pronounced in Vancouver, Richmond, Abbotsford and Burnaby.
Some suggest a new wave of immigration is rising. Speaking at the recent Jurock Housing Outlook conference last month, ace condo marketing expert Cameron McNeill of MAC Marketing Solutions, said indications are that Vancouver will be seeing an influx of newcomers, not only from China but the Middle East, Persia, and both Eastern and Western Europe. He noted that Vancouver’s worldwide exposure during the 2010 Winter Olympics will help to convince more people to immigrate. “We don’t realize how good we have it here,” McNeil said. According to McNeil, condo developers are seeing an increase interest in properties from offshore buyers. Central 1 Credit Union agrees, forecasting that net immigration to B.C. will top 55,000 within two years, but adds that the number of people moving into B.C. from other provinces will also remain strong, at around 1,000 or more newcomers per month.
The bottom-line for foreign buyers of course, is that, Canadian housing is seen as inexpensive compared to what they deal with at home. Consider this: the average price of an executive-style house in Shanghai, China, is $1.3 million (Canadian) and even in depressed Dublin, Ireland, a four-bedroom detached house sells for an average of $1.13 million, according to a global price survey done by Coldwell Banker. “Compared to many major markets throughout the world, Canadian real estate looks like a bargain,” said John Geha, president of Coldwell Banker’s Canadian operations.
This year, the United Nations ranked Canada fourth in the world under its Human Development Index, which takes into account life expectancy, literacy, school enrolment and per capita gross domestic product in 182 countries. Yet, if you look at the list, which was compiled before the economic downturn late last year, Canada should be ranked even higher. Norway took first place, Australia was second and Iceland took third. But both Norway and Iceland have been hammered by the recession and, while Australia can be congratulated on its ranking – and its still strong economy – it doesn’t have the Rockies or hockey. By the way, the United States ranked 13th on the list. Vancouver, also and naturally, has been ranked by The Economist magazine as the best place to live in the world for the fifth year in a row.
Then there is the inherent stability of the Canadian economy and political scene, our proximity to the USA, and the one thing we shrug off as incidental but that amazes newcomers: the opportunity to experience actual wilderness. I talked recently to a visitor from Germany who is planning to make Calgary his home. He told me of hiking near Banff and realizing that, if he kept going, he could travel hundreds of miles without seeing a building, a person or even a power pole. “That is impossible anywhere in Europe,” he said. Indeed, on our crowded planet, it is unheard of nearly anywhere in the developed world.
If you live in Vancouver, take a 12-inch ruler, lay it down on a map of the downtown and point it towards the North Shore. Before you have moved a foot, you would be deep into a wild that hasn’t changed in thousands of years. Like most of us, few immigrants will ever hike that far – it is just knowing that it is there that makes Vancouver so unique.
The surprise should not be that immigration to Canada, especially the West Coast, is increasing but that it has not yet become a stampede! In a way it has: The population of the Lower Mainland will double by the time your teenager is having children, and most of the growth will be due to new people coming here to find a better life.
While the majority of new immigrants aspire to home ownership, newcomers are also a major driver for the rental market. A study done by Canada Mortgage and Housing Corp. showed that 45% of immigrants to Vancouver were still renting a home four years after they arrived, and the vast majority is renters during the first few years. This translates into a need for at least 35,000 rental units each year – mostly in Metro Vancouver – and long-term demand.
What does this all mean to Vancouver’s housing market? It means that the city will continue to see accelerating demand for homes, regardless of what the local economic trends would suggest.
Above article comes from ozziejurock.com
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