Prices & Population Growth

If there is one reason that is repeated at least as much as any other for why Toronto home prices will continue to rise it is because the Greater Toronto Area’s population just keeps growing. Prices can not fall because more and more people continue to move here.

The problem with this argument is that there has literally been no period of time since Toronto’s population has been tracked that the city has not grown. However, there have been long stretches where home prices did not. Comparing the two statistics shows there has never been a consistent correlation between population growth and home price growth in Toronto. There have been periods when both population and home prices grew, as there have been times when home prices fell, or population growth slowed.

Pop GrowthSource: Stats Canada, TREB, Six Housing Sense

The graph shows how much home prices have changed over the years in comparison to a more stable population growth percentage. In the 1980s, home prices were surging while population growth was strong at roughly 3% annually. More recently, home prices were again strong, but the GTA’s annual population growth was just 1%.

Pop census yearsSource: Stats Canada, TREB, Six Housing Sense

Examining home prices to population we see that over the past 40 years the GTA’s population growth rate has actually been slowing. In the 1980s, the two censuses tracked the GTA’s population growth at 14% between 1981 and 1986, as well as between ’86 and ’91. This rate slowed over the next five years to 9% during the recession of the early 90s and then improved only slightly to 10% to close the millennium. The first decade of the 2000s saw the population grow by 9% in each five year period. From 2011-16, however, the growth rate slowed down to just 6%, or a 1% annual increase. From the 2016 census, the data shows that the GTA was growing at its lowest level since 1980. Despite this, prices skyrocketed in the five years from 2011 to 2016.

total pop growthSource: Stats Canada, TREB, Six Housing Sense

Even in total numbers, the amount of people moving to the GTA in 2016 was the lowest it has been since 1980. The region’s population growth in total numbers peaked between 2006 to 2011, with 469,915 new residents moving to the GTA. From 2011 to 2016, that number fell by nearly 125,000 to just 344,976 new residents, or 25,000 less people per year. In comparison, home prices have never acted with any true connection to population growth. Through the housing downturn of the early 90s, population growth slowed but was still above current levels. The GTA’s population rebounded in the late 90s and early 2000s, while home prices improved year to year with no consistency to the population influx.

As we follow home prices going forward, Toronto continuing to be a growing and prosperous global city will obviously play a factor, as its impossible to deny that population loss would negatively impact prices. However, to say prices will rise because the population is rising is an over simplification that does not hold up to scrutiny. Prices can fall even if the population is increasing, just look at the 1990s.

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