The short answer is “it’s too early to tell.”
The longer answer is probably synonymous to the reason I’m asking this question, so I’ll give you that rationale first:
I have a couple of motivations for wanting to answer this question, but the primary one would be my concern for young Canadians and our role in the housing economy in the future of Canada.
What do I mean by European housing model?
Essentially, I mean a market with a few key indicators:
- high rental rate among young people
- declining or historically low home ownership
- high presence of foreign capital and ownership via foreign direct investment
- high institutional ownership
- commoditization of residential real estate as an asset class
- multi-generational ownership used as a wealth-building tool for families
- aging population holding majority of real estate equity
- attractive migration destination
- immigration driving population more than birthrate
Does this sound familiar?
A European housing model is my prescribed nomenclature for the ownership structure we see in the real estate market in Europe today. I think Europe is an interesting dichotomy in this respect because it’s a much more mature property market whose urban economic history has shown some parallels to what Canada is experiencing today. My worldview may be a little skewed here because I am Swiss-Canadian, a Swiss Citizen, and lived in Switzerland for my military conscription at 18 years old. Switzerland is very expensive.
Trying to find a good match
For the purposes of “Europe” in the title, I’ve sort of used nations that Canadians like to think they’re similar to on a few different metrics:
- Quality of life
- Employment (amount, type, and wage)
- Type of government
- Housing (tenure, ownership, cost)
I also needed a close comparison by population because that’s your demand side. Because of the nature of the graphs I used and the way they double-up the Y-axis explained below, I had to get creative to make the graphs meaningful. The biggest challenge I ran into was that the way this site records building permits in Canada is by value, whereas in European countries it was by number. Here’s an example of a graph I ended up with.
When you look at Austria, there is a slight trendline comparison, but still too much of a long-shot:
I’ve been using the Trading Economics tool referred to me by a friend on Twitter. Problem is, the first few graphs I attempted ended up with vastly different Y-axes, and I couldn’t find a quick fix. While the graphs do lend themselves favourably to a side-by-side trend analysis, they didn’t really tell me anything concrete enough to answer this question. I cross analyzed as many graphs as I could with US data as well for comparison.
So, ultimately Switzerland isn’t an exceptional comparison. Poland is closest in population, but quite far in regards to the nature of the state on the aforementioned criteria.
How Canada is not like Europe
I think it’s important to outline something to protect myself from being called an imbecile for this analysis. That something is that Canada is vastly different from Europe in the respect that it’s significantly larger in size, and significantly younger in colonization. Canada is also, for the most part, geographically and topographically quite different than Europe, and this relieves Canada of a lot of the microcosmic microurbanism forced upon a lot of European countries. We replaced that with (greenbelt) policy to force microcosmic urbanism instead. Of course, when Canada was settled, it had a lot of shoreline, coasts, ports, rivers and mountains. It also had a lot of untouched land around those things. We started this game a lot later than a lot of places, and while sea and rail freight still plays a pretty big role in global trade, air freight exists, and it certainly did not when Europe was having its renaissance.
Canada is also very cold. Some say this protects us from disenfranchised US voters who claim they’re going to move here when X-party gets elected. I say it leaves us with a short growing season and relatively infertile soil conditions by comparison to a lot of our European counterparts. I want to comment about wine here because we don’t have our own Bordeaux and have played a secondary role in the new-world wine movement by comaprison to California and Australia. That being said, I’m actually pretty thrilled with Canada’s wine game, given that they created a hybrid grape called Marechal Foch, named after a brilliant general who is hopefully somewhere in my family tree.
More challenging agriculture means a lot of things for a nation-state, far more than I’m able to dive into, but if you’re looking for further reading, here are my favourites:
And to my Nordic, Scandinavian, and Eastern-Bloc friends – I know, you’re cold too. I didn’t forget about you – we will send you Canada Goose. Climate plays a role in my thesis for migration patterns of the future if the climate crisis perpetuates. Climate also plays a role in where people choose to live. There are some good comparisons here, and you’ll be a part of them.
90% of Canadians live within 100 miles (160km) of the US border. If we reduced the gorgeous landmass of our country to that size, and the population accordingly, it’d be pretty close to that of one or two European nations, so, there might be some merit to comparison here. This is not to say that areas outside of this 100 mile belt are not important. In fact, I think they’re extremely important for the future of this country and the world. However, they could complicate the story I’m trying to tell here.
Now that I’ve wasted a bunch of your time with disqualifying complicated assumptions that could differentiate Canadian housing from European housing, I’m ready to proceed. We can focus specifically on the economics of housing to see if there is any merit to this fear of mine.
The longest answer to the question is, frankly, an emotional rollercoaster with almost as many peaks and valleys as Canada’s ownership rate. I’ll admit, I wasn’t able to draw a meaningful conclusion from any of these, other than the closest ownership rate trendline is in France:
I did start to get a little bit more traction on Housing Starts vs. Building Permits:
Housing Starts/Building Permit Data – Canada vs. Europe
This seems to just be telling the story of the global economy:
Germany gets us a little bit more correlated for the last 5-ish years. Honestly a lot of this just looks like parallels in the global economic picture, no news here. Nothing groundbreaking.
Housing price index started to allude to something, but it could also just be a global economic generality:
Go France! These guys know how to do regular cycles. Italy… well, I guess it’s time to start exploring what makes them so different. Our government likes being in debt too! Our banks, on the other hand…
Home Ownership Rate in Europe vs. Canada – The Data
Again, my apologies for the offset Y-axes, I’m as frustrated about it as you are. We’re basically reduced to a trendline analysis here until I can run the source data through API into excel (I’m working on it).
A lot of people own their homes in Russia.
Be mindful of the axes here. Although in decline, Italy and Spain still outperform us. I was actually expecting to see much lower ownership in most parts of Europe.