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. Prince Edward Island is a model of the benefits of population growth.
In Canada, nearly 200,000 new housing units (both single family and multi-family) were built in each of the last two years, according to the Canada Mortgage and Housing Corporation (CMHC), including nearly 1,000 units in Prince Edward Island in the last year. A good part of this continued growth in the housing market can be attributed to increasing levels of new Canadians.
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 (70 per cent in Prince Edward Island) own their own homes. Atlantic Canada has the highest percentage of single detached home ownership in the country (69 per cent in P.E.I. 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 majority of homeowners in the region, the value of their homes has not kept pace with other parts of Canada or even with inflation over many decades. This is clearly not the case on the Island, however.
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. Put simply, the largely stagnant population growth in most of the region has caused many communities in the region to have too much housing supply and too little demand. In a buyers’ market, this leads to lower housing prices.
While some P.E.I. communities have a healthy housing market, these are communities where the population is growing. The best housing markets in Atlantic Canada currently are in Charlottetown (and nearby bedroom communities), 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.
Fifty-three per cent of Islanders live in rural communities (population less than 5,000), nearly three times the national average (19 per cent), which compounds the problem. There is literally no market for their homes as a result of declining population, especially for larger homes.
Prince Edward Island is experiencing a housing boom as a result of leading the region (and the country overall last year) in population growth. There are now more housing units being built on the Island than Newfoundland and Labrador, a province with more than three times the population but in a population in decline. The P.E.I. economy has outperformed the rest of Atlantic Canada over the last decade or so, largely due to steadily increasing population growth. There can be no economic prosperity without population growth.
Despite the spectacular growth in population, particularly over the past four years (+10.5 per cent), that increase has been uneven across P.E.I.
Charlottetown, and the nearby bedroom communities of Stratford and Cornwall, have been the major beneficiaries. As a result, the population of Queen’s County is growing (now represents 54 per cent of the population), while King’s County and Prince County populations both declined in the most recent census.
All communities of reasonable size across Prince Edward Island need to have their own population growth strategies, which will help sustain and grow local economies. This includes a plan to attract and retain newcomers, especially immigrants, as they are the drivers for new housing and economic prosperity.
For those with properties outside the areas with population growth, expect the value of those properties to remain low (maybe even below replacement value) or more likely decline as population decline continues. Also, be prepared to wait longer to sell - 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. He can be contacted at [email protected] or on Twitter at @donmillshfx.
More from Don Mills:
- More than 4,000 Prince Edward Island business owners will be looking to sell in the next 10 years
- Gap between public, private sector jobs must continue to narrow on PEI
- Could more Prince Edward Islanders face poverty in retirement if changes aren’t made to the CPP?
- Can Prince Edward Island afford eight hospitals?
- Private sector must take the lead in retaining immigrant workforce on Prince Edward Island
- P.E.I.'s higher-than-regional average of immigrants boosting the economy
- Prince Edward Island has the best economic growth in Atlantic Canada — but is it enough?