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Canada may actually need more housing

Canada may actually need more housing

Posted by Juan Gavasa on November 19, 2014

While many have been worrying about a bubble, a new report suggests Canada may actually need more housing to accommodate incoming immigrant families.

According to CIBC World Markets, immigrants represent about 70 percent of Canada's population growth, but the bank says that figure may underestimate the number of people who need housing, noting official immigration figures don't include other "non-permanent residents," such as students, temporary workers and humanitarian refugees.

“Ask any real estate developer in any of Canada’s major cities about the risk of overbuilding, and the first line of defence would be immigration and its critical role in supporting demand,” Benjamin Tal, CIBC World Markets’ deputy chief economist said in a report. “It turns out that at least for now, this claim is more valid than widely believed.

Canada's population of 20- to 44-year-olds grew by 1.1 percent in 2013, the fastest pace seen in almost 20 years and 75 percent higher than the rate seen in the U.S. Despite some concerns of overbuilding in the current housing boom, the ratio of housing starts to household formation is not far from its long-run average of 1.03, indicating no signs of froth, Tal says.

"The broadly inline aggregrate trend in Canada's homebuilding means that eventual wind down in the current boom won't have to be as dramatic as feared by some."

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