Outlook of the Canadian Housing Market: Thoughts from the World Economic Forum
Discussions on technology, geopolitics, health, the future of jobs, climate change, business, and fairer economies were addressed by the world’s thought leaders and movers at the 2020 World Economic Forum in Davos, Switzerland. The forum takes a current pulse of the world while looking ahead to the future in efforts to make positive change globally.
Over 6,000 km away in Canada at Purplebricks, we dove into the World Economic Forum conversations. We were left to reflect on how these discussions at Davos will impact the housing market in the Great White North. A healthy real estate market today, and tomorrow, is of great importance for the health of Canada.
Public Transit 2.0
“Location, location, location” has long been the mantra of the real estate industry. That’s why a condo in downtown Toronto can cost over a million dollars more than another condo less than an hour away – it’s all about location. Well, at least for now.
With high-speed public transport on its way into the world’s major cities, where you work and where you live may for the first time be very different. Reducing personal use cars will cut down on CO2 emissions and likely bring some much-needed personal time back to citizens.
The Government of Canada is working on designing a 39-minute speed train from Toronto to Montreal using Hyperloop technology. The fact that residents in Montreal could potentially work in Toronto with a commute that is shorter than many people’s current driving commutes from home to work is revolutionary. Location may take on a new meaning with enhanced public transport technology, in addition to changing the job market with a greater pool of applicants vying for premium jobs in major cities.
“Green” Homes are Our Future
Zero carbon buildings will be a component of the climate change solution by focusing on decarbonization, electrification, efficiency and digitalization. Close to 40% of global greenhouse gas emissions come from buildings. Currently less than 1% of new buildings are zero carbon, but businesses and cities are already committing to be 100% zero carbon in the next several decades. Some notable universities, including Stanford and University of California, have made commitments to make their campuses powered 100% by renewable energy.
This soon-to-be trend of zero carbon buildings will likely spill into the residential housing market. We can expect to see home builders designing homes with a low or zero carbon footprint. Existing homeowners may look to renewable energy to “green” their home and save money on energy costs. Changes in housing design will ramp up when consumer’s demand for it increases. Similar to how carpet on the main floor or radiator heating is a thing of the past, a non-energy efficient home will not appeal to the homeowners of tomorrow.
Experts are saying that your network still matters for accessing opportunities. Your network is largely based on who you surround yourself with, including at work, your neighbourhood, and in your home. Research indicates that, “living in a high-income neighbourhood, going to a top school and working at a top company can lead to a 12x advantage in accessing opportunities. This means that two people with the exact same skills, but who were born into different neighbourhoods, may be worlds apart when it comes to the opportunities afforded them.” Thus, location will likely still reign supreme for homebuyers who are striving to be at the centre of it all. For the Canadian market, this will likely mean large cities will continue to see great demand for housing that supply cannot keep up with. People’s networks may need to shift to outlying smaller city centres in order to achieve desired home price and square footage.
Jobs are likely to change in the years to come as automation becomes more prevalent. This may mean “manufacturing cities” could see workers leaving these types of jobs behind to reskill in a more resilient field. The quest for new skills could result in residents of these cities moving elsewhere for different work or schooling. Having a city tied heavily to one type of industry could result in a shaky real estate market in that area.
Making news at Davos was Andrew Funk, an activist who was previously homeless, who camped outside of Davos to bring attention to the global homelessness problem, impacting 150 million people, about 2% of the population, worldwide.
In Canada, it is estimated that 235,000 Canadians experience homelessness each year, or 0.6% of the population. It is arguable that the most effective step for reintegrating the homeless into the general population is for them to have a place to call home and feel safe. It is virtually impossible to work, at least legally, without a permanent place of residence.
The gap between the rich and poor has been reported to be getting wider and there have been talks of Canada implementing the concept of basic income, which would support lower income individuals to bring them up to a basic standard of living.
For citizens in general with low incomes, it is nearly impossible to buy a home in many of Canada’s major markets. This, coupled with solving homelessness, may result in Canadians seeing more subsidized housing. Financial housing support may encourage more balanced conditions in the real estate market. As a result, lifelong renters could have the ability to own a home, which would bring vacancy rates up while bringing rental rates down to a less inflated level. The more Canadians who can enjoy the benefits of homeownership, the better it is for the economy.
The materials we use to build homes, the home improvement projects we see value in, where we choose to live, and who we surround ourselves with will change as the world changes around us. Currently in many of Canada’s major markets demand is outpacing supply, which means people who can purchase a home are having difficulty finding one within their desired budget and preferred location. The increased demand inflates housing prices that greatly outpace salary increases; entering the housing market is harder than ever for young people. On the other end of the spectrum, Canada’s population is aging, and experts deem more immigration is what we need to fix the problem in order to support seniors to age in place and live well in their twilight years. Couple these issues with homelessness and the climate change crisis, and we are likely to see some ebbs and flows in the real estate market in the coming decades. Despite global changes, real estate remains one of the safest long-term investments Canadians can make. It is an investment that provides both shelter and historically secure wealth growth; that is unlikely to change.