Thank you, Mr. Chair.
Good afternoon, members. Thank you for the invitation to speak here today regarding this study on inflation in Canada, which is a particularly timely topic.
I founded North Cove Advisors in 2013 and since then have covered Canadian housing and household credit trends for institutional investors around the world. More recently, I founded Edge Realty Analytics, which I'm representing today. We work with real estate professionals here in Canada. My main area of expertise is housing, and it's on this topic that I wish to speak today.
To put it simply, housing in Canada is in crisis. I think we all understand that affordability is deteriorating, but it's sometimes helpful to look at the latest data to frame the magnitude of the problem.
The price of the typical house in Canada in February, as measured by the MLS home price index, was 29% more expensive than one year ago. This equates to an annual increase in value of nearly $200,000 for the typical home in this country.
The problem is getting worse. If we go back to 2000, there have been only nine months where prices rose nationally in excess of 2.5% in a single month. Seven of those occurred in the past year and we have had three record-setting monthly gains in the past four months alone. February set a record, with prices rising 3.5%, or the equivalent of $29,000 in a single month.
How did we get here? Price increases of this magnitude provide a clear signal that we have a significant imbalance in supply and demand. How we got to this point and the potential policy responses going forward are a matter of much debate, but I would like to address just a couple of the underlying dynamics that I believe have led us here.
The first is an undersupply of single family homes, which became an acute crisis during the pandemic. Canada has underbuilt single family homes in major metro regions. To frame that for you, consider that in the decades from 1970 through to the 2000s, Canada averaged a population growth of 3.1 million per decade and we completed roughly 1.4 million new single family homes. That's 3.1 million in population growth and 1.4 million single-family homes. However, from 2011 to 2010, population growth surged to 4 million, but new completions fell to 1.1 million, so we had a massive acceleration in population growth and a steep slowdown in new single family housing completions.
When COVID hit, there was an understandable and notable shift in preferences among consumers towards lower-density living, which is exactly the type of housing unit that we had been underbuilding. The consequence is that, today, when we look at the number of single family homes listed for sale in major metros, across the country, we find it's roughly 40% below decade averages. That's the first issue.
Overlay on top of that robust population growth, which has not seen a buy-in from municipalities to deliver the necessary housing. I would say off the top that one of our superpowers as a nation is our ability and our willingness to attract the best and the brightest from around the world. We have consistently enjoyed population growth that's among the highest in the G20. While we should all recognize that this is necessary to maintain long-term economic growth, we have to acknowledge that there are trade-offs, particularly when we are facing a supply-constrained housing market.
The problem as I see it is that immigration policy is set at the federal level, but the ability or, in some cases, the willingness to deliver the housing necessary to accommodate this growth resides at the municipal level. We have seen in recent years a concerted and misguided NIMBY movement—not in my backyard—which has been a major impediment to new supply growth. These voices have disproportionately influenced decision-making at the municipal level. This needs to be addressed, and I was encouraged that in the most recent election, several parties proposed policy solutions that aimed to heavily incentivize municipalities to remove unnecessary red tape and expedite approval for thoughtful developments that would bring much needed new supply to the market.
Part of the current housing crisis can be traced, I believe, to 2019. At that time, population growth in Canada hit nearly 600,000 in a single year, due in part to a record increase of 200,000 non-permanent residents, primarily international students.
I do not believe that we have the capacity in this country, even with buy-in from municipalities, to deliver enough housing to accommodate that level of population growth. Allowing population growth at this level without consideration of the real world constraints is a policy failure that cannot be repeated. We need better coordination in Ottawa to ensure that the combined population growth through international migration and non-permanent resident programs does not exceed the ability of the construction industry to house that growth.
When an asset is perceived to be in scarce supply, it naturally attracts speculation, so there are two sides. A shortage of inventory and speculation are two sides of the same coin. This is particularly true in an environment of low interest rates, where people are forced into riskier investments to earn a return.
Even when we account for strong population growth, home sales on a population-adjusted basis remain about 25% above long-term norms. The dollar volume of homes sold in Canada has surged to $460 billion in the past year alone, which is more than double pre-COVID levels.
Clearly we're dealing with excess demand that cannot be explained by demographics alone. Based on land registry data, I estimate that roughly half of the increase in home sales that we've seen since 2015 is due to a rising share of multi-property owners. Investors and speculators are now disproportionately driving demand and because these investors—