Scotiabank says recent immigrants now driving force in real estate market
By B.H. Mckenna
The Canadian Press
July 11, 2009
TORONTO At least two of Canada's big banks have found encouraging signs in the country's housing market, one financial and the other social.
A commentary from TD Economics on Thursday said there are encouraging signs that a bottom may be forming under the Canada's depressed homebuilding market, citing an eight per cent increase in housing starts in June on top of a 10.8 per cent increase in May.
Although homebuilding activity overall remains one-third below the pace of a year ago, the report prepared by TD economist Pascal Gauthier noted that the June climb “marks the second consecutive monthly increase in starts after a long string of nearly uninterrupted slides that started last fall.”
On a regional basis, June's urban starts increase was lead by a 59.4 per cent surge in the Prairie region, followed by a 25 per cent gain in B.C., and a more modest 3.1 per cent increase in Ontario.
On the flipside, urban starts slid by 6.3 per cent in Quebec and 3.9 per cent in the Atlantic region. However, the bank said regions east of Ontario have generally not seen the same extent of decline as elsewhere.
Overall, the figures “provide more evidence that the Canadian economy has certainly passed the worst of what can be expected in terms of residential investment contraction,” TD said.
Meanwhile, Scotia Economics issued a report Thursday saying it has been recent immigrants who have been driving housing demand in Canada.
The report cited census data that showed 72 per cent of immigrants lived in a dwelling owned by a household member in 2006, up from 68 per cent in 2001.
By comparison, the percentage of people born in Canada living in a dwelling owned by a household member rose only two percentage points over the same period, from 73 to 75 per cent.
Because the analysis was based on 2006 data, it was unclear what effect the current recession might be having on the number of immigrants and others entering the housing market.
But it was clear from the report that Scotiabank expects that trend in real estate to continue.
“Given Canada's aging population and relatively low fertility rates, longer-term household formation and housing needs will be largely determined by immigration,” said senior economist Adrienne Warren.
Based on standard assumptions regarding immigration, fertility and mortality rates, Warren said immigration could account for 75 per cent of the growth in Canada's population a decade from now, up from 60-65 per cent today, and for almost all of it by 2030. Most of this growth will be in Canada's urban areas.
Among other things, the report highlighted that the faster transition to home ownership among immigrants was supported in part by strong labour markets, which saw the employment rate for core working-age recent immigrants jump 3 percentage points between 2001 and 2006 to 67 per cent.
This was faster than the 1 percentage point gain among their Canadian-born counterparts, which rose to 82.4 per cent.
“The better labour market performance of recent immigrants may reflect a favourable skills mix, with many employed in high-growth industries such as engineering, construction and skilled trades,” Warren said.
“It may also reflect a greater geographic mobility to meet shifting regional labour requirements,” she added.
Of the more than one million immigrants that came to Canada between 2001 and 2006, 69 per cent settled in the three largest metropolitan areas, Toronto, Montreal and Vancouver, according to the data cited by Scotiabank.
A growing proportion – 28 per cent – settled in somewhat smaller centres, most notably Calgary, Ottawa-Gatineau, Edmonton, Winnipeg, Hamilton and Kitchener.
Less than three per cent chose to live in a rural area.