The housing industry is an important part of the economy, but in Atlantic Canada, it trails behind the rest of the country because population growth has lagged — or, in some cases, stagnated — compared to the rest of the country.
Without real population growth, the demand for new housing is severely restricted.
In Canada, nearly 200,000 new housing units (both single-family units and multi-family) were built each of the last two years according to CMHC, including 4,000 units in Nova Scotia in each of the last two years. A good part of this continued growth in the housing market can be attributed to increasing levels of newcomers to the country.
The housing market in Canada has been supported by population growth, averaging one per cent for much of the last 50 years or so. Since the last census, the growth rate has increased as Canada significantly increased immigration to address impending labour force needs as baby boomers retired. The country expects to attract a million new immigrants between 2019 and 2021, and more than 300,000 new immigrants came to Canada in the last year alone, putting demand for new housing even higher. Population growth is increasingly driven by immigration, as birth rates in Canada have fallen below population replacement rates.
In Canada, about 68 per cent of households (69 per cent in Nova Scotia) own their own homes. Atlantic Canada has the highest percentage of single detached housing ownership in the country (69 per cent in Nova Scotia versus 54 per cent in Canada). For a high percentage of those homeowners (especially those without a private pension), much of their personal net worth is tied up in the value of those homes. Unfortunately, for the vast majority of homeowners in the region, the value of their homes has not kept pace with other parts of the country or even with inflation over many decades.
This helps explain the relative affordability of housing in the region compared to elsewhere in Canada. While affordability is often touted as a key advantage of living in Atlantic Canada, it is equally a disadvantage for those counting on the equity in their homes for retirement. The value of homes is based on simple supply and demand market conditions. The largely stagnant population growth in most of the region caused many communities to have too much housing supply and too little demand. In a buyers’ market, this leads to lower housing prices.
While some communities in Nova Scotia have a healthy housing market, these are communities where the population is growing. The best housing markets in Atlantic Canada currently are in Charlottetown, Halifax, and Moncton (especially Dieppe), where population growth is at the highest levels in the region.
Another challenge relates to an aging population. Housing needs change with age, especially after children leave the household. There is a tendency to downsize, especially as individuals approach retirement, to better manage cost-of-living going forward. Unfortunately, there are simply not enough potential buyers to replace baby boomer homeowners as they downsize or depart the housing market, as seen in many smaller urban and rural communities that have a combination of a declining population base and an aging population.
Without real population growth, the demand for new housing is severely restricted.
In Nova Scotia, 43 per cent live in rural communities (populations of less than 5,000), more than twice the national average (19 per cent), which only compounds the problem. There is literally no market for homes as a result of declining population, especially for larger homes.
There are many smaller urban communities with the same problem, including Yarmouth, New Glasgow, Sydney and Amherst. All suffered population decline in the last census with continuing out-migration of youth, a primary market for housing. The only housing need for many of these communities is long-term care facilities.
Prince Edward Island is experiencing a housing boom as a result of leading the region (and the country overall this past year) in population growth. In fact, there are more housing units being built on the Island than Newfoundland and Labrador, which has more than three times the population but has a population in decline.
In Nova Scotia, the population has finally started to grow at the national rate (1.5 per cent on average over the last four years) after decades of slow population growth (population only grew 0.2 per cent between 2011 and 2016, according to the most recent census). This has helped create demand for new housing stock (and jobs). Unfortunately, much of this demand has been limited to Halifax and a few other smaller urban communities, such as Bridgewater, Kentville and Truro, where there has been reasonable population growth. There is little new housing construction outside these four urban communities, except perhaps replacing old housing stock.
As I have advocated in the past, the urban communities in Nova Scotia (economic hubs) need their own population growth strategies to help sustain and grow local economies, including plans to attract and retain newcomers, especially new Canadians. Newcomers are the drivers for new housing and economic prosperity.
For property owners outside the areas of the province with population growth, expect the value of those properties to remain low (maybe even below replacement value) or, more likely, decrease as population decline continues. Also, be prepared to wait longer to sell these properties - in the end, the housing market is all about supply and demand.
Don Mills is the former owner of Corporate Research Associates and a recognized expert in data trends in Atlantic Canada. After selling his business recently, he remains passionate about data - and learning the guitar. He can be contacted at [email protected] or on Twitter at @donmillshfx
