Canada’s Housing Supply Has Outpaced Household Formation For Two Decades: BMO

Canada’s oldest bank is doubling down on its claim the housing supply shortage is a myth. BMO Capital Markets wrote to clients on Thursday morning with another data point — completions compared to household formations. The bank’s analysis argues housing completions have outpaced household formations for two decades. However, easy credit and wave after wave of demand stimulus has driven excessive housing speculation.

Canada Has Built More Homes Than New Households For Two Decades

New data from the national statistics agency challenges the narrative of Canada’s housing supply shortage. “Canadian Census data on private dwellings occupied by usual residents suggest that household formations have consistently lagged new housing supply for the better part of two decades, even accounting for some likely underestimation of formations,” said Sal Guatieri, a senior economist at BMO. 

BMO Estimates Up To 92,000 “Surplus” Homes Were Made In The Last 5 Years

His calculations show household formations average just over 181,000 in the five years leading to 2021. In contrast, last year the market saw nearly 223,000 newly completed homes, as home prices continued to accelerate. Over the past 5 years, he estimates a surplus of 92,000 homes — eclipsing demolitions, less than half that number on the high estimate. 

Cheap Credit and Speculative Dreams Drove Excess Demand

Ask any Canadian and they’ll tell you the best investment is real estate. Having gone on a 30-year run, most people assume this means home prices will forever continue to outpace any productive investment. That unfortunately might not be the case. 

Last year, the Bank of Canada (BoC) Deputy Governor explained low rates helped to drive home prices higher. Traditional monetary policy believes that lowering rates allows home buyers to save money on interest. In reality, the Deputy explained people just borrow more to pay for the exact same thing. 

It wasn’t until last year that the BOC considered the role of psychology in credit demand. They found 30-years of driving interest rates lower helped to inflate home prices and move money from the productive economy to non-productive speculation of financialized assets. 

“The country doesn’t have a supply problem so much as an affordability problem due to recurring waves of excess demand pressure,” explains Guatieri. 

To paraphrase a popular statement from the last time Canada thought it was underbuilding and it was proven wrong — it’s the money, stupid.



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  • Doomcouver 1 year ago

    Awesome. I crunched these numbers myself using census data and came to the same conclusion a couple years back. It’s great to see BMO using this to attempt to dispel the ridiculous supply shortage myth. A supply glut is coming very soon so I hope they’ll throw this in front of the “real estate experts” on the MSM when they’re confronted with the mystery of where all the supply mysteriously came from.

  • Herbert Bourguignon 1 year ago

    “They found 30-years of driving interest rates lower helped to inflate home prices and move money from the productive economy to non-productive speculation of financialized assets. ”

    Canadians have become one asset wonders! Our GDP way to reliant on housing.

    We will pay a heavy price in the mid-term as we have stifled healthy economic growth in order to accrue artificially high housing asset appreciation.

  • Ava 1 year ago


  • J 1 year ago

    Bad news for the speculators and investors who stocked up on 1br 400sqft micro condos.

    1. New grads don’t have the moolah to buy. The ones that got a loan or inheritance from family have already bought.

    2. Couples want more space, it is not much more for a 2br condo with more space. Might as well shell out for that.

    Only option left is to rent/lease out the units for market rent (whatever that will be). My guess is that it will not absorb the trigger rate increases on their existing variable mortgages. The golden goose turned rotten real fast.

  • Patty 1 year ago

    I agree with your article. Here in Vancouver, there are row of townhome communities that are waiting to get built by demand…there is no shortgage of land! whoever came up with that land shortgage messaging sure got away with it because it’s in everyones vocabulary. This mindset on top of low rates sure drove the overpriced market we have today (and throw some money laundering in there too!)

  • Kay Min 1 year ago

    The only way Government can do is to invest in more affordable housing units. That way can resolve housing and rental crisis for younger generations who are struggling for affordability to stay.
    As the same time, the Government can punish the ones who created the crisis.

    • Han Thanh 1 year ago


      If they try to build anything they’ll inflate commodity prices further because Canada is already building one home per every 1.25 people.

  • Matt 1 year ago

    Okay but what about all the households that want to form but can’t afford at current prices? Despite the fact that my wife and I are both full time nurses we live her parents house because we cannot afford to form our own house unit. If prices dropped enough we may just move out.

  • Jon 1 year ago

    A well thought out and researched article. Another major contributing factor to increased prices has been the two largest generations (boomers and millennials) chasing the same assets believing they would never decrease. As baby boomer generation withdraws from housing and markets to support retirement, they will have to decline in value. Less dollars chasing more available product. Any governmental interventions will only serve to kick the can down the road and make it more painful when we are forced to reckon with the facts. Houses are this generation’s tulips.

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