Canada’s recent population boom has reached it’s strongest growth in nearly three decades. Under Prime Minister Justin Trudeau, Canada’s population has jumped by 1.4 percent over the past year, double the U.S. pace, driven by a surge in non-permanent residents like students and higher immigration levels.

Canadian Economists are calling it the “human stimulus.”

Canada population growth
Source: Bloomberg

Amidst the recent population boom one can’t help but reminisce the last time Canada’s population growth was this robust. It was the late 1980’s, and Canada was in the midst of a housing boom. Between 1985 and 1989 the average price of a house in the GTA increased by 113% in real terms.

What we have learned from housing booms is that they create knock on effects, and self fulfilling feedback loops. Low interest rates and credit expansion help kickstart housing booms. This expansion spurs new credit growth and foreign capital flows, pushing home prices higher, and spurring new home construction. This in turn creates additional jobs, increased wages, and a flood of new immigration to absorb labour shortages. Many of whom become employed in the booming construction sector.

This appears to be the case in Canada, where total housing under construction has reached an all time high, but so too has non permanent residents as a share of total population growth.

non permanent resident growth Canada
Source: Ben Rabidoux, North Cove Advisors.

When you strip away non permanent resident growth, you can see population growth has been rather benign. Thus increasing vulnerabilities if non permanent resident growth slows or even declines, which has historically been the case amidst an economic slowdown, particularly in the housing and construction sector.

population growth canada
Source: Ben Rabidoux, North Cove Advisors

There have certainly been many prior examples of housing booms spurring rapid population growth and their subsequent reversals. Perhaps none more obvious than the recent case of Spain.

From 1998-2008 a spectacular housing boom and a stunning immigration wave gripped the country of Spain. This resulted in large net flows of migrants, which peaked in 2007 along with the housing boom. As construction halted and unemployment began to rise, migrants left the country and migrant flows turned negative.

Spain Migration Flows
Spain Migration Flows

An economic research paper titled “Immigration and Housing Booms: Evidence from Spain” captures the extent of the relationship where home prices jumped 175% during the decade. “Between 1998 and 2008, the average Spanish province received an immigrant inflow amounting to about 17% of its initial working-age population. We estimate that, over the whole decade, this population inflow increased house prices by about 52% and led to the construction of roughly 2 million new housing units. These figures imply that immigration can account for 30% of the total increase in prices and 37% of the total residential construction activity over the period. That is, immigration was responsible for about one third of Spain’s spectacular housing market boom over the last decade, both in terms of prices and quantities.”


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