Did We Just See The Peak Of Population Growth ?

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio. Welcome back to the Canadian Real Estate Investor podcast and thank you for making us Canada's number one real estate podcast.

[00:00:22] Today we're going to be talking about immigration, population growth and more specifically a report from Desjardin that talks about how we're likely going to see a drop in non-permanent residence, as well as a few articles about people leaving Canada or immigrants struggling once they've arrived here.

[00:00:40] Yeah, great topics but before we get into it, we want to just ask a small favor. We've put a lot of time and energy into making this podcast and honestly we both love doing it.

[00:00:54] But if you ever feel compelled to support us, we have a few ways that you can do that and Dan, what are those? First you can subscribe to our newsletter on Substack. It's a more visual version of what we do here.

[00:01:10] We reference it quite a bit. It's linked in the show notes any other ideas, Nick? Yeah, secondly you can sponsor or host a meet-up or come out to one of the 15 meet-ups we have across the country.

[00:01:24] Again, which is linked in the show notes, we have 15 now. I'm hoping to have every major city in the country. Hopefully by the end of this year that would be great. Your goals are always more ambitious.

[00:01:35] I'm not. We even each other up. That would be great. I agree whether or not it's a cheapable who knows. So those meet-ups are the second Tuesday of every month in cities across Canada.

[00:01:45] If your realtor or a mortgage broker who wants to sponsor us or host one of those, we're making that possible in 2024. So let us know what else could I do if I wanted to support your podcast, Nick?

[00:01:59] Great question, Dan. Thank you for asking. You could post a link to your favorite episode on Facebook or if you're professional. You could do that on LinkedIn or Instagram, Twitter or WeChat. I know Dan, you're still a big my space guy. You can catch me on Amazon.

[00:02:17] I'm so I was a my space guy. I think it's actually my sink. It's actually coming up on the show before that you were a big my space guy. If you're still on my space, you know, go share your podcast there or literally wherever you prefer.

[00:02:31] Yeah, it's a quote to great. You care whenever. Another thing you can do whenever wherever is leave us a five star review. It's right in the podcast platform. Actually I don't think you're able to do it on Spotify.

[00:02:48] If you do listen on Apple, you can leave the five star review on Spotify but you can not type your. You can leave a five star rating not right or review. Yeah, so hey, we'll take ratings or reviews. I think suck us for both. Yeah.

[00:03:00] Yeah, it's giving seasons over. So we can't just ask people for these Christmas presents anymore. So we have to we have a rationalized a little bit exactly any other final ideas before we get into the show.

[00:03:12] Yeah, if you're looking to really take things to the next level, you could check out our course at realist.ca. And that's linked in the show notes as well. We have a lot of listeners who are part of that community.

[00:03:21] Everyone's learning growing becoming better real estate investors. If you need an accountability system, if you need kind of more one-on-one group coaching group setting, It's a great place to be. So I love it there. Got me too.

[00:03:33] Okay, enough of that back to the show. My name is Nick Hill and I'm Dan Foch. Wow, just just Dan now. We're not doing Daniel anymore. I really like that two-syllable name thing you got going on. So you're copying me, you're I'm flattered.

[00:03:49] I guess Nick and Dan is a little, full of these. You're rolls off the tongue. Yeah, well it's just like it's efficient and pragmatic. One less syllable for people to appreciate that.

[00:03:59] So today we're going to be talking about a trend that's gaining momentum, which is Canadians leaving their urban lives for more affordable and possibly more glamorous living overseas.

[00:04:09] Interesting. That's right, Dan. And we've got an incredible story here about bear with me as I pronounce these names because this is not as one syllable Nick and Dan. Slaco, last chuck and Pedro Jose, Marcellino. I think if you're listening, we'll give it to you.

[00:04:31] Slaco and Pedro, I do apologize. I'm doing my best here. These two left Toronto for beautiful sunny Portugal trading there $2,200 a month apartment for a literal mansion.

[00:04:45] This all comes from an article entitled, All I'm doing is working and paying bills. Why some people are leaving Canada for more affordable countries? I will say that it is definitely the Canadian way to be just working and paying bills. That sounds familiar.

[00:05:03] So they're not alone. We're seeing a significant number of Canadians moving abroad for better living standards and believe it or not cheaper housing. So if we're usually talking about, I think a lot of professionals in the real estate space go to one or two things.

[00:05:23] It's immigration, population growth, there's more people than houses. So if that's your bull case, is this kind of emigration that we're seeing actually the bear case. Because they talk about how we're seeing a record level of emigration. It's only like 35,000 people left the country.

[00:05:41] Right. Now, im being people coming in, im immigration being people leaving the country. And I'll actually be honest here, I don't think it is. A bear case, like everyone's always like everyone's just sitting around. We just love to complain. Like, we just love to complain.

[00:05:57] I'm drinking a can. What else do we have to do? I do it. Everybody knows that. I do it in a lot. I don't want to complain once or twice. The reality is, I'm not leaving. I want to quote Wolf Wolf Wolf Street here where I'm not leaving.

[00:06:14] Exactly. And I do think that we are going through a dark time right now for as a country. And I think that we're going to emerge victorious and rebuild everything.

[00:06:24] And I think that you kind of got to burn it down a little bit like a Phoenix so you can rise from the ash. Yes, well let's look at history what happened after the dark ages. Right. That's when we went into the Renaissance.

[00:06:34] Right. And I didn't know that. This might be our little time to do that same thing. So cool man. We can just get up there and paint some naked people on some churches. That's what happened right there.

[00:06:46] That is exactly when there have been lots of naked people were painted back then. They painted naked people different back then than they would now I just assumed, but we are getting drastically off topic. Yeah, we are. Let's talk about naked people on the show ever before.

[00:07:00] So anyways, let's talk about some people that have clothes on and that are doing some cool things. So let's dive back into sloco and Pedro's story here. These two were inspired by of all things. TikTok videos, which usually on the show we say,

[00:07:19] you know, maybe don't get to inspired by the show. There were some far more catastrophic financial decisions that were inspired by TikTok videos. Yes. Five years. Yes. This is not one of those cases. This is actually a one of the romans. Well, in the story. Yes.

[00:07:34] Exactly. So anyways, these two were inspired by TikTok videos showing the stark contrast between overpriced Toronto houses and European castles. So of course, they're referring to Millennial Moran on TikTok who is a friend of mine on social media. I call all these people my friends.

[00:07:51] I don't know if they actually think we're friends but I love using that line. A friend of the show essentially means that like either either someone knows we exist or they haven't made it clear that they don't like us. Yeah.

[00:08:03] And he's a great commentator on the Canadian housing market. Honestly, one of my favorites. And yeah, I mean he's got a huge TikTok account. Yeah. I mean he's hilarious. He's got I think like 160 plus thousand followers on TikTok over four million likes

[00:08:20] and his bio reads. This is good Canadian content for people who love to hate Canadian content. And that's just beautifully ironic right there. For my mom here for it. It does this amazing series called the Canadian real estate versus literal European castles,

[00:08:37] which I become a fan of lately but also a long time ago. But especially lately because as people have been listening to the show, no, I've been going through a bit of a liquidation lately and I've been looking to diversify into maybe getting a getaway in Costa Rica.

[00:08:51] I'm going there for the first time in a couple of weeks. And so I can use that to kind of like cash flow as an Airbnb. And yes, because I know how many of you message Jordan Scranco when he said he was doing a deal in Costa Rica.

[00:09:03] I would be willing to take on partners because I know we're going to get emails about it. And I'm assuming I'm automatically in a partnership. So you're not going the European castle route in. You're going the Costa Rican route, which I guess would be fair.

[00:09:18] Like I'm very fortunate in such that my family already has exposure to real estate in Europe in a really nice place that looks like a fairytale village. And so I wouldn't need to get.

[00:09:28] But I did always think about having my wedding at like a castle, like small wedding, rent out a castle and like friends with something cool. Wow, you just really have young boy grows up dreaming of their fairytale wedding. Yeah.

[00:09:40] But yeah, I guess it will actually much Disney but you know, like just rent out a castle, have everybody come and stay and just hang in there and get married at some point. But anyway, any one of my buddies is actually doing that now, which is pretty cool.

[00:09:55] Anyway, so yeah, let's get into these. Yeah, yeah, we'll get to some example. So the the castles he does if you go in an ice suggest go watch millennial morons take talks. If you're not on. He's going to show by the way, he's going to come.

[00:10:10] He'll be on the show in the next couple of weeks. Yeah, probably long overdue. He also posts a lot of these videos on Instagram. So if you don't take talk, go check him out there. He doesn't know that we're wrapping him in Pumpiness Tires hard right now.

[00:10:22] So I did mention to him that we would be this. We'll be. Oh, we did. Okay. So so he in I guess a more recent video compares a six bed six bath house in Vancouver that was built in 1951 which sold for six million dollars in 2016.

[00:10:43] What the heck is going on? Maybe that one's maybe a bad comparison because but it is the most recent one. But so maybe not maybe not the best example because it's easy. Like you could pick if you pick me picking a six million dollar Vancouver house,

[00:10:55] it's like you could find a lot of places. We've done a lot of things around the world. Yeah. Yeah. I mean, I mean Vancouver is just a bit of a bad example. Anyways, because everything there calls multi millions dollars.

[00:11:05] But maybe maybe but he says that you can do a castle in Switzerland built in 1905 with six bedrooms and 16 rooms. So 7,000 square feet. So since Switzerland is like the Vancouver of Canada anyways, like skiing and stuff.

[00:11:22] Yeah, I think the skiing in Switzerland is a little better than the Swiss Elves might be whistle or even the actual whistle. I actually hear you. It's a really good comparison. It's different. The Alps are just like they were made for skiing.

[00:11:34] These big like grass fields in the mountains. Are you going to start doing ski resort comparison? Yeah. It's funny. Like, you know, actually I've talked about this stuff a long time ago

[00:11:45] and it's not to say like, I don't ever want to get on that like, oh, I started because I didn't. But you know, a lot of people were with the Pierre Polyevah did the thing about Niagara, Ontario and Niagara, the US.

[00:11:59] Yeah. And then he took it from this guy Shazzy on Twitter. But I posted myself in Steven Pumwasi, we're posting that comparison five years ago. Steven and I took it from Steven, right?

[00:12:10] So it's like, there's no such thing as an original idea. But anyway, no, I'm not going to start comparison. But anyway, but you're so, anyway, it is expensive. Switzerland is expensive as well. So it's not like saying, it's not like the rest of the castles.

[00:12:25] Like this Swiss one's different. It's an outlier because it's very expensive. Not like the other ones were there from like France or Italy. Why do you say Italy like that? What do you have against Italy? You Swiss people are...

[00:12:36] You've always not your better than that's a talent to have in you. Do you know what it is funny? Like I've spent enough time in Switzerland to know that like everybody in Europe has some sort of comment about their neighboring country.

[00:12:45] Everybody's like, no, people are like, avoid the people with the Italian plates on the cars at most of the time by fine, right? So yeah, anyway speaking of Italy, he does one in Ottawa. It's a two bed, two bathroom house for 1.3 to million.

[00:13:03] He compares that to a beautiful Italian castle for 900,000 euros with 25 rooms, 8 bedrooms, 12 bathrooms, Dan 12. Yeah, now in Canadian real estate versus literal European castles part 23. Yes, he's done quite a few of these at this point. Oakville Ontario house on Burnham Thorp for $2.4 million.

[00:13:33] But if you need to save some money, you could buy a castle restored in 2015 in France for 1.35 million euros.

[00:13:43] Oh man, so you might be wondering why we're talking about this. So let's circle back to our friends, sloco and Pedro from the original article that we were talking about.

[00:13:55] So let's lock out a pharmacist in Pedro move to Vienna, do Castelo district, purchasing a mansion for about 1.05 million, a price you'd struggle to find for a family home and Toronto.

[00:14:08] And this isn't just any house, okay? They're talking about lower living cross across the board, better food prices, better sell service. There's even a hefty grant for restoring this beautiful historic property.

[00:14:26] Yeah, it's a bold move Nick and they're not just chasing a dream home. They're setting up a cultural hub at Guesshaus. It's a complete lifestyle overall. Sounds really cool and you know it's not just about the finances I guess when you're doing something like this.

[00:14:40] Loco mentioned looking forward to setting different priorities. And again, not just quote unquote working and pain bills which seems to be the unfortunate reality of a lot of fellow Canadians at this point.

[00:14:54] Yeah, I've been worried about this for a while and I've been watching, I mean we talk about immigration a lot on the show and we mentioned it earlier in the show how we feel that a lot of people talk about it as if it's the bull case for Canadian real estate.

[00:15:08] And it probably is a big part of it. But things like this make me wonder whether or not we can sustain those record levels of immigration that we've been seeing.

[00:15:18] Yeah, for sure. And remember we were talking about where population growth is most pronounced where outpices and this is very important where outpices new construction, which is hinting just about everywhere.

[00:15:33] But a lot worse in some areas. So for example, the National Outreach population growth ratio to new homes being built is 4.7. But in new bronze week, it's 11.3 in Newfoundland. It's 9.7. It's a scatual on its 8.8. So magnitude matters as well.

[00:15:54] Dan, do we want to pause here and just kind of reiterate what these mean specifically because this is a very important piece. And I know we did a full episode on this but let's just do a little reminder here.

[00:16:05] So this is the ratio. Actually, you know what I have the chart at the end of the episode but it's a ratio of people moving to a province to the ratio to the number of homes that are being built in that province.

[00:16:15] So when we say 11.3, what does that mean? 11.3 new people are moving to New Brunswick for every one home that's being built. So in last so good. Unless all those people moving there going 11 people to a house, then they have a problem.

[00:16:31] I mean, hey, listen, you and I both were in university and had roommates at one point. I think never 11. No, we were six guys living in the front room. Yeah, the odd slumber party after 11 is pushing.

[00:16:44] Yeah, yeah. So what happens when population growth outpaces infrastructure like housing or health care or jobs? You know, transit, you're being about buses being rammed. The view seems the pictures of the TTC recent events like you start.

[00:17:01] Yeah, so you start to get headlines like this one that says they came to Canada for their dreams and said they found a mental health nightmare.

[00:17:08] So you see, you see, you know, lovely. Now the article you just mentioned discusses the mental health challenges faced by immigrants in Canada highlighting the stress of adjusting to a new country and the gap between expectations and reality.

[00:17:25] It mentions the impact of the accultralation process on mental health and the difficulties immigrants face in finding suitable jobs. The article emphasizes the importance of studying and addressing the mental health needs of newcomers to ensure they're well-being and successful integration into Canadians society.

[00:17:47] I mean, that's kind of heartbreaking here, right? That's not good. Yeah, there's a quote from the article that's like something like over time all of our like sad desk gradually becomes comparable to the average Canadians sad this.

[00:18:03] I was like, I read that I was like, oh man, like that's just like is that where we are? But anyway, yeah, I'll find the quote while you're doing well. The says, because it's such a good way of saying it.

[00:18:17] But it's not exactly the Canadian dream anymore is it? Not, not the Canadian dream I remember or that I was bought up. And so what becomes the consequences of all this? Like what happens?

[00:18:30] Yeah, so we mentioned earlier in the episode, these are some summarized it. Wow, there we go. I can't even say the word summer because it's so interesting. These are being winterized. Yeah, they're amazing.

[00:18:42] They summarized it well in the most recent economic viewpoint. How much will Canada's population grow? Nobody knows, but we can predict where it goes. I think they were trying to rhyme. There's very doctors soon. They are dancing to banking. We believe the rhyming for us here.

[00:18:56] From the highlights of the article, a population or sorry from the highlights from days are down here. Population projection is foundational to Canada's economic outlook. As it's made up of the consumers and the workers who will drive future economic activity and government revenues,

[00:19:19] once taken for granted the population growth forecast is now more uncertain than ever. So they go on to say that Canada's population is surged recently, largely driven by a sharp increase in that permit residence, such as temporary foreign workers and foreign students.

[00:19:37] Assuming future immigration is in line with federal government plans, NPRs will be the primary driver of population growth moving forward. And we've seen that in the if you look at the lines, the immigration line, so people are coming here with permanent residence, PR has basically flat lines,

[00:19:53] so it's not growing or but NPR is going up. This is why you're seeing most of the pressure happening on rents. So rents are still climbing like crazy because people who are not permanent residence are banned from buying houses.

[00:20:06] Yeah, it's two years right? They can't buy for two years. So what do they do? They rent. Right. And yeah. So the forecast for working age population, that's people 15 and over that was used in the recent economic and financial outlook is roughly consistent with the projection through 2025

[00:20:28] in the Bank of Canada's October 2023 monetary policy report. It's suggested working age population growth could average about 1.8% annually from 2023 through to 2022. And over the same period, we expect real and trend or potential GDP growth to average 1.5 and 1.7% respectively.

[00:20:54] So looking at alternative scenarios for NPR admissions, closing the door to temporary newcomers could deepen the recession expected in 2024 and blunt the subsequent recovery, which they show in a graph the first graph in the report.

[00:21:08] They say it would similarly lowered potential GDP GDP are provincial analysis came to a similar conclusion they say.

[00:21:17] So materially increasing the pace of NPR admissions would likely raise real GDP growth to the point of possibly preventing a recession in the near term and improving long run economic outcomes.

[00:21:28] The day sure 10 report goes on to say that while the pace of non permanent resident admissions should slow naturally with the economy changes in the federal government policy could cause them to fall even faster. A sharp drop off could deepen the recession expected in early 2024.

[00:21:48] So for you listening, that's right around the corner. As such caution is warranted on the part of policy makers to minimize the economic downside of slowing newcomer arrivals too quickly.

[00:22:01] But it's not as easy to strike that balance as sustained high NPR admissions could further strain provincial finances and housing affordability.

[00:22:11] So for me this there seems to be a bit of a trend here, Dan and correct me from wrong, but it seems like policy makers here whether be GOC or BOC have been doing things a little faster than they should.

[00:22:25] Does that sound about right or is that is that am I just thinking interest rate hikes and immigration too pretty big things that affect the economy here.

[00:22:34] Yeah, it's tough to say I guess time will tell right you never know like I think they're kind of forced to overshoot on the rate side of things because you only start cutting what or so you only start increasing when.

[00:22:46] You're already to you already have a problem right and then you only start cutting when you already have a problem like everything's very reactionary and I think it's going to be the same way on on this I think so you end up I don't know why like you would hope that they are can be anticipatory with policy but yeah I think what happens.

[00:23:03] Like you end up with this thing called the pivot paradox if we're talking just rates where like in you you're going to see it in the spring market this year watch when the central bank signals that they might pivot people just freaking go nuts and that you know what I mean like you hear realtor's talking about it all over TikTok now rates are coming down at like.

[00:23:21] I was posting charts where it's like we probably just hit the volume bottom and people are like price bottoms in I'm like bottoms in that's a link from here. You know. Guys, that's not what I mean. I like after putting all caps now like not price so.

[00:23:34] I just like so the pivot paradox is you tell people we're going to pivot and then they behave like you're going to pivot and then that exacerbates the problem which is the economy's running too hard. It's doing inflationary and so.

[00:23:44] I don't know I'm just glad I'm not a central banker or policy maker honestly at this point just a simple podcast review.

[00:23:50] But I mean the soft landing thing it would be you know that would that would be what you're trying to do with being anticipatory is like cutting before the recession.

[00:23:58] We're already in recession right they can revise this out as many times as they want like we're just getting a financial. Getting yeah. I'm just going to keep hitting well know they actually just like revise so we had three quarters of negative GDP.

[00:24:08] But there would just had our third and then they took the first one and said oh no that one didn't actually.

[00:24:13] Like anyway so so anyway so the question I'm trying to figure out now is is this tapped out right and this comes from my sub stack which I'm actually just going to I think we're just going to roll it into the newsletter to be honest with you.

[00:24:26] Yeah yeah we're going to put all of our efforts into just like well we just wanted to deliver like we want to be in your inbox realistic. Yeah that's what we want.

[00:24:33] That's like we just and but as you were saying it's a really good visual component to what we're doing here. Yeah and like we want to try and like our goal here we've already built a big enough platform I got really feel that way.

[00:24:45] I obviously want to keep growing it like it's a business you know we make money from it we out but like for me it's we want to create as much value as I can now like I'm and so.

[00:24:54] How do I do that I think creating visuals like a visual companion for this in the form of newsletter and then eventually videos I think is really going to be.

[00:25:00] And so we've been playing around with the videos for those of you who like for the 50 people watching the one YouTube. Thank you.

[00:25:06] Like we'll start doing that a little bit more I think and trying to integrate like charts we have like a three camera set up but one of the cameras broke and that was the one that was supposed to show the charts.

[00:25:14] So whenever I get that from the top of the fact that yeah like just full it's you know us we're technical difficulties since you've been.

[00:25:21] Yeah even following day and night for a while you know we we bootstrapped a lot of stuff and we haven't stopped doing that even even with the growth and we've had we were still bootstrapped.

[00:25:29] Yeah it's funny you think you like eventually get to a point where like I should outsource this and find a qualified person to do it but no no absolutely not yet.

[00:25:39] Anyways back to yeah so my question is like it really stands out to me like have we seen PR growth kind of like tapped out right and this could be from my perspective why there's an article that says auto wall plans to create Canadian citizenship path for undocumented immigrants according to the global mail.

[00:25:58] And so a lot of people like to mention out population growth is the bull case for Canadian real estate but we're not seeing growth in permanent residents and those are the ones who can actually able to buy homes remember foreign buyers are banned for two years.

[00:26:11] So I think you can apply the same logic but imagine since the vast majority of population growth is coming from non permanent residents all that growth is appearing in rents and why does this matter we why do we talk about immigration so much.

[00:26:23] Well eventually rent growth should materialize in price price growth not immediately but eventually as rents are the income portion of a property valued through the income approach. How do we measure the income approach the easiest way to compare the income approach and property side by side is.

[00:26:38] Caprate cap rate is net operating income divided by a property value so your rents going up is the income of your properties going up and so if cap rate doesn't change which they're honestly not changing we're going to get to why in a second because you know I love to talk about my select.

[00:26:52] We love if cap rates are if cap rates remain unchanged and income goes up the value of those properties will go up exactly so. So let's talk about that and so if cap rates are able to stay the same investment property violations should therefore increase accordingly.

[00:27:09] So with that growth that's experienced in that net operating income you're an O. I and honestly it seems that the most recent injection of capital into C and me she's MLS leg program where we saw another 20 billion in mortgage back securities that that have been.

[00:27:25] Specifically designated for that program then I'm pretty good job at setting the setting a floor on multi family valuations given that these mortgages provide up to.

[00:27:34] Again, sexy stuff like 95% loan to values and up to 50 year amortization periods if you hit your 100 points again we did a full episode on this it's I believe it's called how to get 95% loan to value.

[00:27:48] I will probably do for another MLS like episode then yeah for sure well and it's funny like with all due respect like more I know a lot of mortgage brokers unlike the what you know you do with the heck that I was the only one.

[00:28:01] I mean they like the most of the volume in the market right now is coming from this stuff.

[00:28:08] Oh, if you're working on a commercial mortgage brokerage like here either doing inventory loans on product that can't move or you're doing MLS or maybe there's some industrial guys that are doing like BDS. I was going to say the other thing.

[00:28:20] Yeah, yeah but that's that's a bit of a different product right I mean the MLS stuff is anyways new episode coming on on MLS like stuff in the next couple weeks.

[00:28:29] Yeah, I mean we're doing a ton of work on it at LAD land bank where we're we're both.

[00:28:33] And honestly like I did a call for the course yesterday so as part of the real estate C.A. course we do Q and A's on a regular basis and I like I'm talking to people who are on their first second third investment.

[00:28:46] And then saying you know and there they're seeing the product and they're saying well why would I go buy a duplex with I have let's say I have 100 grand why would I go buy a $500,000 duplex when with the same cash injection I can buy a sixplex and you know and create more affordable housing get a better product because in order to buy that sixplex I have to improve the you know.

[00:29:07] The thermal quality and all of the fixtures and the furnace and what make it way more efficient and whatever and so.

[00:29:14] It's like it's not just a product that is accessible for big builders and you're going to get to it because the language that they use on the on the web site is like says at all from my perspective but like this is this is the real thing right now like this is when you talk about renaissance.

[00:29:28] This is the renaissance period for Canadian real estate right the ventries notebook right here that's a little bit much but it's a ventry part of the rest of the painting naked people. I don't know I thought I don't know.

[00:29:41] Yeah, sorry sorry my history teachers so remember I just mentioned and we did a full episode on this again a while back and I think it's come up in some of the news articles and we've created short form content as well because this was a big deal the government on locked 20 billion dollars and.

[00:29:57] New financing and that was supposed to help build 30,000 more apartments per year and that was all m li select financing so this is a direct quote from the government of Canada's website.

[00:30:12] To ensure builders have the low cost financing required to build more rental projects the government is increasing the Canada mortgage bond.

[00:30:20] Issue in slim it by 20 billion dollars per year designating the increased amount for funding mortgage loans on multi unit rental projects that are ensured by CMHC eligible rental projects must have at least five rental units and conclude apartment buildings.

[00:30:40] Student housing and senior residents yes you heard that correctly the government wants investors to create housing my region. Just wait. They also want them to have the cheapest financing in the country to create that house to get to be true.

[00:30:58] This is really why we haven't seen cap rates break back into their typical channel, which is if you look at so I'm looking at a chart right now and you can find this in the call yours cap rate report from Q one of 2023 they they show basically.

[00:31:13] Cap rates over the Canada 10 year bond yield and you use a 10 year duration bond yield as a baseline because real states more of a long term asset probably in a whole different ten years minimum.

[00:31:23] It's so these cap rates typically are 400 to 600 basis points above the Canada 10 year bond yield.

[00:31:29] They don't depend on those bonds, but they depend on Canada's discounted MBS program and a very unique credit product any correction that should have appeared in pricing has basically been pushed out and de-risk by owners into massive.

[00:31:44] And so capital rates are staying tight like they're only 268 basis points above and so the national average cap rate is 268 basis points above the Canada 10 year bond yield for comparison in 2020 it was 487 basis points above in 2015 it was 463 basis points above and in 2008 it was 435 basis points above the Canada 10 year bond yield.

[00:32:10] The cap rates are the tightest historically the tightest they have been ever and they're staying there and this is from my perspective this is why. Yes, let's add some context to that so.

[00:32:21] How unusual or Canada's recent year over year population growth statistics now the chart that Dan and our looking at here which is shows the fastest growing populations in the world and we'll read some of them out to you here.

[00:32:38] The chart shows the rate of change or essentially the speed of change relative to our G7 peers end of course are neighbors to the south and the African continent. One thing that is obviously not like the other so. Dan, let's talk about this chart here.

[00:33:00] So just how fast is Canada's population growth while let's look at a list of the fastest growing populations in the world so number one you have serious 6.39 percent per year second you have south sedan sorry lots of s is there south sedan is second at 4.78 percent and you have 9 year at 3.66 percent.

[00:33:21] Burundi at 3.59 percent equatorial guinea at 3.36 percent Canada at 3.34 percent Benin at 3.31 percent you go on to at 3.22 percent Congo at 3.3 percent Chad at 3.13 percent those are your fastest growing populations in the world one of those things is not like the others right and so and so this is like it's just where it's how do you forecast for something such an

[00:33:51] outlier on a global yeah you can't we're when you're on press it and I think we just did a recording we're talking about unprecedented use of the word unprecedented pandemic whatever and this is like this is more on this is a president like we're going to know we're about so how do you

[00:34:08] really forecast how do you make investments based on something that is like we're growing as fast as countries that are in emerging markets that don't have

[00:34:17] nearly like they're not developed countries like ours so how do you how do you make the gap like you can you can usually see

[00:34:24] what that path will look like in equatorial guinea or you go on to we know where they're we saw these these growth trajectories take place in other emerging markets like China and India over the past right when

[00:34:35] they're quickly thirty forty years ago right i mean essentially that that was like China's industrial revolution thirty forty years ago right so we're seeing a lot of these countries in the

[00:34:45] African continent get to that point where they're going through the industrial revolution something that we experience here in North America you know well over a century ago

[00:34:54] but somehow Canada's on this list with with the rest of them right doesn't really make sense yeah so i i'm very interested to see

[00:35:04] how this all take shape so let's talk about the way forward so there seems to be a bit of a consensus forming that slowing or capping international student growth at a minimum in line with Canada's capacity to comfortably accommodate those students makes perfect sense

[00:35:18] in fact three and four Canadians say higher immigration is worsening the housing crisis addressing Canada's housing crisis is imperative and careful considerations of the fact by policy makers is crucial at this juncture and boy would actions speak louder than words right now and from my perspective

[00:35:36] policy makers seem to be ignoring this and i think it's kind of coming out why like you know there was like and then some people like to get

[00:35:41] conspiratorial about this stuff but i think like there's that century initiative where Canada needs to have like a hundred million people by twenty one hundred

[00:35:49] and i came from like a McKinsey report which is among the forty billion they spent on consultants last year and whatever and yes we're in the wrong business and i guess

[00:35:57] start consulting thing but anyway you know everybody's talking about like we have to grow the population we know that we're in a very similar situation

[00:36:05] to a lot of these other aging economies where you know you need you have a replacement rate that you need to prop up the pension system a little bit you

[00:36:12] we need people to to serve the older the aging population but that's your demand curve and the supply side everybody was like the

[00:36:21] and the government right now is going after the supply side but the demand curve is a lot easier of a fix here for my perspective than the supply side which is you know had just maybe

[00:36:29] should we not let in one point four million people per year like let's you know let's figure out a number that makes sense because understanding that we need to grow but like are their consequences too and it seems like there are based on what we're just discussing

[00:36:43] in this well for sure i mean a few things that first of all actions always speak louder than words in my opinion most politicians would likely disagree with me there but that's okay

[00:36:54] you know just to my earlier comment you know i feel like some policy makers have really done things very quickly this is one of those things right like let's let's

[00:37:04] allow you know one and a half million people in and then realize that maybe we should have had a plan to do that for me that isn't insane amount of people to let in with with no plan

[00:37:16] right i mean again we can go back to that that party metaphor right it's like you know what was that movie that came out years ago we get a party suck the straight

[00:37:25] too many people yeah no chips yeah not even that but like if you if you invite you know if you if you've got a one bedroom condo

[00:37:33] and you invite a thousand people over where's everyone people are going to get in the door right so anyways enough bad analogies let's talk about one of my favorite things

[00:37:43] and investment thesis so one of my thoughts around this is that a lot of people dismiss magnitude when they evaluate population growth in areas they're thinking about investing

[00:37:55] for those who believe that access demand is the driving bulk case for Canadian real estate it would be worthwhile to examine where in Canada the excess demand is most pronounced well most of the immigration ends up in the GTA of course i literally

[00:38:14] just made a video on that this morning that says over half of the Canadian population literally lives along the 401 corridor the beautiful great highway one of the best so on a percentage basis many of these areas are growing faster especially now this is where it gets really interesting

[00:38:32] relative to their housing supply growth yeah so Fraser Institute recently did a report on this and we did an episode about this

[00:38:41] a while ago on this report came out but just as a recap so i'm just going to read the annual ratio of population growth housing completion in the provinces

[00:38:49] and i'm just going to read the 22 numbers so new for them labored or had 9.7 people for every new house that was being built

[00:38:56] no beskosh had 7.7 people for every new house that was being built new brands week had 11.3 people moved to the province for every new house that was being built

[00:39:09] Quebec had 2.8 people for every new house that was being built Ontario had 5.5 people moved to the province for every new house that was being built man at home before point six Saskatchewan 8.2 that's third in the country

[00:39:22] Alberta 6.2 and British Columbia below the national average of 4.7 at 3.5 new residents moving to British Columbia for every house that's being built

[00:39:33] so if i were to gas i'm not a betting man but if i was a betting man i would say this is not a problem that's going to solve itself any time soon

[00:39:42] wait problems of the budget stone balance themselves problems solve themselves i don't know why i mean lie to you i know i really thought i really thought that was going to work

[00:39:52] i mean do we do we try to figure out a solution for it on on in the last couple minutes here digs i i you know the solution simply is in in my

[00:40:02] the solutions to factored and this is this is going to be as easy in his high levels i can make it in like 30 seconds one start to figure out this this immigration problem because it is turning into a problem it's turning into a problem for

[00:40:18] for especially the immigrants that are coming in there now being that were sold a false dream and they're coming here and it's brutal you hear the stories you see the articles

[00:40:27] you know you see the lines for for minimum wage jobs like this is not good for for anybody so curb that figure out a way to to slow that to a reasonable amount of growth well at the same time

[00:40:41] do everything you can to amp up the ability to build more homes care at a development charges increase incentives and release some crown land for developers to build on

[00:40:55] literally doing a simple few simple things like that i think it actually make a big difference anyways i will leave it there want to finish this off with some of your brilliant ideas i mean i think it's pretty much what we talk about on the show

[00:41:07] and this is what we're teaching people how to do every day in the courses speak becoming a citizen developer taking a house and turning taking one unit and turning into four units i mean right now we know that real GDP per capita and Canada is into

[00:41:22] decline and so what that means is Canadians are getting poor and while that sounds bad and it is the way that that will materialize for most people

[00:41:32] is like the way that most people see that and feel that is through shrinking household sizes yeah right they're not going to see that their diets not going to change

[00:41:41] right like really their new year they're going to get a small their houses are going to get smaller we have the highest third highest square footage per capita in the world

[00:41:49] you're going to start to see that shrink and you're going to start to see household size increase the number of people per household so our household size

[00:41:56] has been shrinking from like twelve people per household on average 150 years ago to 2.6 people per household in present day and that's going to

[00:42:06] not new runs with their going back to 12 people yeah so maybe in the next couple years but you know so so GDP per capita is into decline Canadians are getting poor

[00:42:15] how does that materialize for the average Canadian i think we're already seeing it more people going getting packed into houses household size shrinking so household size growing square footage per capita shrinking we end up like year up in a renters economy where every houses are multi-generational asset

[00:42:30] you get passed out generation generation you live with your parents longer your parents come moving with you when they're retired or you know and they're rather than moving into a home or whatever

[00:42:39] that's where we're going that's and that's and so you want to if you want to be in to the Victoria you can see it happening on policy it's happening on policy already uh... the federal government is literally going around bribing municipalities into up zoning

[00:42:53] and they're also giving the lowest they set they literally says it on the website we read the quote earlier in this episode they're giving the lowest interest rates in the market to people who want to build five plus unit buildings

[00:43:06] and if you are interested in learning more about those low interest rates or those super long amortization periods through m li select seriously reach out to dana and i we are helping citizen builders and developers alike across the country

[00:43:24] think we've got several hundred units under construction literally in in several different provinces that we are helping fund right now through this program so you know we can go through what you need it's you know you have personal network statement couple documents some construction drawings and

[00:43:44] and we can get you off of the race so it's interesting to right because we talk about this with with guys in the course yesterday on the call it was like you know along on a like when you talk when you go from like a do plaques right

[00:43:58] do plaques is like uh... you got two two units in a house right it's still a house you go to like a four plaques

[00:44:03] you know when you're still in a house that kind of like they can be a little weird for the average person right and so it starts to get a little bit scary

[00:44:10] the only major structural difference i would say between a four unit building and up is sprinklers that's what i said in the call yesterday right that's really the only major structural forest suppression i interesting right that because once you get new commercial building with so many

[00:44:25] built build as well so that yeah the fire gets suppressed immediately what rather than people having to escape because you have more people to get out of the out of the house so most people who are who understand houses and mechanical systems in a house and all those things could own a five plaques or six bucks but they don't necessarily have to in the reason i say that is because

[00:44:47] you can still do this you could do you get six units by having three do plaques side by side by side right three lots with up down bungalows on them

[00:44:56] wood qualify as long as they're uh... contiguous three contiguous lots and this is all available on the cma she website but you could have

[00:45:04] three lots side by side that each have it up down do plaques on them yeah and that would qualify for cma she and my life

[00:45:11] life finance i mean literally one of the ones that we were on a call with the other day uh... another one of the partners at land bank and i this one's cool it's in the you contriertories that's can that's still can it's the right and uh...

[00:45:24] shut up to uh... to sign anyway knows a listener to the show and um... yeah it's three it's three it's two units sorry two separate buildings three units in each six total

[00:45:36] off to the races for sure awesome okay i had a ton of fun on this one dan appreciate it as always hope everyone got a ton of value out of this i know we did bring up naked people at one point let's forget about that and

[00:45:50] that's not that kind of renaissance and we're made a different kind of a son of he let's remember all the other value that we brought to this episode hope you guys enjoyed it reach out anytime thanks so much for listening to all we have brought up

[00:46:00] naked people before on the show because we're talking about the tide goes out people swimming yes so we talked about new to the show that we have the upper rating pg 13 yeah okay see later

[00:46:13] the Canadian real estate investor podcast is for entertainment purposes only and it is not financial advice nick hill as a mortgage agent with premier mortgage center and a partner in the g and h mortgage group

[00:46:27] license number one zero three one seven agent license m two one zero zero four zero three seven deno foshes a real estate broker licensed with rare real estate a member of the Canadian real estate association the Toronto real estate board and the Ontario real estate association