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GGnoRE · 06-09-2022, 12:55 PM

I hear the population growth argument frequently but I'm not really convinced. Population growth was never the primary reason why real estate prices had a parabolic rise, so population growth doesn't have to align when the valuations are coming down from an extreme level. It was the massive influx of capital via quantitative easing and secular downtrend in interest rates that drove all asset classes, including real estate, to record valuations (macro trends which have completely reversed now).

Metro Vancouver is projecting a population growth of 1% per annum until 2050 http://www.metrovancouver.org/servic...onalGrowth.pdf. That low 1% growth won't even translate to 1% growth in homeowners unless you assume that every net added person will be buying a home. Also, a sustained increase in condo supply that offer a more reasonable valuation could compress the premium for detached homes (how many new homebuyers can afford million+ mortgages when rates are continuing to rise?).

Over long-term, population growth and local GDP growth will support growth in RE prices but when valuations are so far detached from the fundamentals, those factors aren't the primary drivers anymore. For reference, Toronto and GTA is already seeing price declines of 10-25% depending on the location and type of home.

https://www.thestar.com/business/rea...bourhoods.html

"West Toronto Lakeshore, which includes Roncesvalles-High Park-Swansea area, saw a significant decrease of 21.36 per cent in the average home price from $1.7 million in April to more than $1.3 million in May.

West Midtown — from St. Clair Avenue West to Eglinton Avenue West, and Dufferin Street to Yonge Street — saw an even bigger drop by 31.15 per cent for the average home price from $2.6 million in April to just over $1.77 million in May.

The main factor for the decrease in these neighbourhoods is that homebuyers are more reliant on institutional money, said Danielle Demerino, a Toronto-based real estate agent.

“They’re more affordable neighbourhoods than Rosedale or Forest Hill. You get the same kind of cachet without spending $4 million on a home,” she said. “But as mortgage rates rise, the cost goes up, it’s less affordable and prices fall to accommodate it.” "

For peeps that don't know Toronto areas, these aren't cheap places.

06-09-2022, 12:55 PM	#22504
GGnoRE RS controls my life! Join Date: Mar 2012 Posts: 768 Thanked 562 Times in 245 Posts Failed 62 Times in 18 Posts	I hear the population growth argument frequently but I'm not really convinced. Population growth was never the primary reason why real estate prices had a parabolic rise, so population growth doesn't have to align when the valuations are coming down from an extreme level. It was the massive influx of capital via quantitative easing and secular downtrend in interest rates that drove all asset classes, including real estate, to record valuations (macro trends which have completely reversed now). Metro Vancouver is projecting a population growth of 1% per annum until 2050 http://www.metrovancouver.org/servic...onalGrowth.pdf. That low 1% growth won't even translate to 1% growth in homeowners unless you assume that every net added person will be buying a home. Also, a sustained increase in condo supply that offer a more reasonable valuation could compress the premium for detached homes (how many new homebuyers can afford million+ mortgages when rates are continuing to rise?). Over long-term, population growth and local GDP growth will support growth in RE prices but when valuations are so far detached from the fundamentals, those factors aren't the primary drivers anymore. For reference, Toronto and GTA is already seeing price declines of 10-25% depending on the location and type of home. https://www.thestar.com/business/rea...bourhoods.html "West Toronto Lakeshore, which includes Roncesvalles-High Park-Swansea area, saw a significant decrease of 21.36 per cent in the average home price from $1.7 million in April to more than $1.3 million in May. West Midtown — from St. Clair Avenue West to Eglinton Avenue West, and Dufferin Street to Yonge Street — saw an even bigger drop by 31.15 per cent for the average home price from $2.6 million in April to just over $1.77 million in May. The main factor for the decrease in these neighbourhoods is that homebuyers are more reliant on institutional money, said Danielle Demerino, a Toronto-based real estate agent. “They’re more affordable neighbourhoods than Rosedale or Forest Hill. You get the same kind of cachet without spending $4 million on a home,” she said. “But as mortgage rates rise, the cost goes up, it’s less affordable and prices fall to accommodate it.” " For peeps that don't know Toronto areas, these aren't cheap places.