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Canada’s Arguably Top Economist Says there’s No Housing Bubble

23 September 2013

Throw a stick out into the crowd of Canadian economists, and you’ll likely hit at least a few that have been saying that Canada is currently in a housing bubble. And while you can go back and forth with this argument, there’s one economist that says we’re in fact, not in a bubble. And he’s got enough credentials behind him to maybe make people sit up and take notice.

His name is Stefane Marion, and he’s not only the chief economist and strategist at National Bank in Montreal, he’s also one of the top 20 forecasters in the world, according to Bloomberg Markets magazine. And he’s the only Canadian to make the list.

Marion says that there are several reasons why those who insist we’re in a housing bubble should be discounted; and that’s for several reasons. The first, he says, is simple demographics.

Last year in Canada, our population grew by 1.2 per cent. That’s a lot compared to the U.S.’ which increased by just 0.8 per cent, and even more than that in Europe, which grew by just 0.2 per cent. The population in Japan, which is another economy the gloom-and-doomers have compared us to, has been shrinking consistently for the past six years.

And last year new immigrants made up the biggest portion of the population in Canada, at a whopping 60 per cent of Canada’s population. Most of those newcomers – 55 per cent – were between the ages of 20 and 44. That’s the time of life when people are making money, starting careers, starting families, and the biggest boon to the Canadian economy – buying homes. Japan on the other hand, has an aging population, a low birth rate, and a very low immigration rate.

“If you don’t have household formation where are your home prices going to go? That’s the key right there. That’s where Canada really, really is different from other countries,” Marion says.

“It does explain why the new housing market or home resale market in Alberta seems to be so tight all the time. This is key. Household formation is just surging,” he continues. “So it fascinates me that we have economists coming out and taking a shot at Canada and not taking that into account.”

But, all of that explains where we are, and where we’ve been. Where does Marion think we’ll be headed in the future? He says that when you look at that all-important 20-44 age group, it’s India that will lead all countries in population growth with a 7 per cent increase, with Canada just slightly behind at 4 per cent. But when you look at certain segments of our country, we may just be edging out even the biggest contender in this category.

“Alberta would be just behind India, at six per cent,” he says. “So that shows you how potent this growth is for Alberta. Alberta actually has the dynamics or properties you’d normally see in emerging economies.”

Taking this into consideration, including the fact that the housing market is not national, but local, it will be interesting to see how the doom-and-gloomers come back with their negative forecasts.

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