The Canadian property bubble is at the point where it’s about to produce brain drain. At least in Ontario. Abacus Data conducted a survey on housing perceptions recently. The survey, commissioned by OREA, produced dozens of insights showing a public frustrated by a property bubble. Buried amongst those insights though was a big standout — a third of Ontario wants out.
Such a large rate of people considering a move is already problematic, but it gets worse. The rate is way higher for young adults, with nearly half considering the move. Typically not a problem for Canada, which uses immigration to smooth demographic issues. That may not be all that effective next time, with half of the province’s new immigrants also wanting out.
Nearly Half of Ontario’s Youth Consider Moving, And Over A Third of Early Career Adults Might Join Them
Over a quarter of Ontario has considered moving to a new province over the past year. The survey found 27% of adults in Ontario have considered moving from the province in the past year. That’s bad enough, but the rate keeps climbing as you look at younger and younger demographics.
Breaking down the stat by age, young adults are more likely to want to move from the province. OREA found 45% of people between the ages of 18 to 29 have considered moving to another province in the past year. The ratio falls slightly for those between the ages of 30 and 44, where 39% of people considered a move. People at this age are supposed to be the most optimistic about their careers. In Ontario, they’re more worried about finding stable shelter.
Ontario Residents Considering Moving To Another Province
The percent of Ontario residents considering a move to another province, grouped by demographic age.
Source: OREA; Abacus Data; Better Dwelling.
Provincial Drain Is Quickly Becoming A Very Large Risk
Young adults considering fleeing, especially at this rate, is very problematic. When home prices consume the economy, it tends to impact both affordability and jobs. The only people really happy are the existing owners. They have a hard time understanding why the rest of the market isn’t having the time of their life.
As for the rest of the market, they become extremely frustrated. If they’re struggling to afford basics, with a low quality of life, they wonder why they’re there. They can either pony up the premium, and support the market, leave, or wait out a correction. Waiting takes a long time, and it may be prohibitive to support the market. That leaves only one option for many — leave.
It’s a very expensive problem for the province to have young adults leave. Places like Ontario (and the rest of Canada) spend a lot to educate and produce top notch talent. They do it to produce high-value contributors to future society. Apparently, before the economy became dependent on real estate, we used to plan for stuff like this.
Now when the person you invested in doesn’t see a future for themselves, they leave. The human capital stock you spent a whack of resources on takes that investment and deploys it in a new region. The reallocation is technically called human capital migration. It’s often called “brain drain,” and it happens when there’s a human and financial capital mismatch. Real estate bubbles tend to be a common example seen around most of the world.
The expensive person you just produced? Well, now they’re moving to a region that paid nothing to get top-notch talent. All they had to do was have a decent current job opening, and cheap housing. In 2021, they don’t even need the job, since they can take their big-city job with them remotely. A minor improvement in value proposition could attract massive investment from a region.
Yo, Your Human Capital Stock Is Fleeing
Human capital goes where it’s treated best, as it should. At least the level that’s skilled enough to be considered mobile. Experts see it as causing a permanent reduction of income and growth in the region they’re leaving. That growth gets reallocated to the new region, along with decades of new spending.
Usually, this is thought of as a national issue, where people immigrate to another country. Like in the early 90s with Toronto hemorrhaging talent to the US. However, it also happens domestically, like that time Atlantic Canada bled young adults to Alberta during the oil boom. Ultimately, talent has options. Youth is talent before it’s even trained.
Almost Half of New Immigrants Want Out of Ontario As Well
Canada’s national anthem might as well have been replaced with the phrase, “we’ll just get more immigrants.” Every time there’s a problem, it appears to be the solution for the country. People don’t want to work for a donut chain for slightly above minimum wage? Immigration can solve that.
The tax base isn’t large enough to cover the amount of spending a government has done? Let’s get more immigrants.
Pensions are underfunded? More immigrants. Home sales soft? Immigrants. You get the idea, but that’s a good amount of the national strategy in Canada. If Ontario loses some of its human capital stock, it can replace them with imports of similar quality. Yes, there’s no way to not sound like a psychopath when you explain how a government thinks.
Importing people may not be the bulletproof strategy it once was in this bubble. The same survey found 46% of Ontario’s new immigrants are considering moving to a new province. A similar situation is happening in BC. It turns out immigrants are looking for an improvement in quality of life. Not a different type of exploitation. Who would have thought?
Now there is a lot more to Canada than Ontario and BC, but the two provinces are major hubs for talent. As markets like Toronto and Vancouver become less viable for young adults, it risks producing systemic market failure. Kicking the legs out of the economy tends to produce a spillover effect into other regions.
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YES! I’m in the restaurant industry, and even if pays were to double, it wasn’t viable for me to live in anything of decent quality. You shouldn’t be at the top of your game, working at a restaurant that makes value for the neighborhood, and then have to come home to a tiny shoebox where you can’t have any sort of non-work-related life.
Moved to Alberta for what I assumed was the summer, and I honestly don’t see the point of moving back to Toronto.
It’s funny how the liberals out East are finally discovering the West. There may be a lot of dumb people here, but there are even more talented and bright people that just want to have a thriving and livable community. Welcome to Alberta, my friend.
Alberta is unlivable with the horrid weather.
I’d rather live in Alberta than talk to another person in Ontario at this point.
Honestly, it’s the weather that I can’t wrap my head around more than anything. I can barely handle Toronto winter without going nuts. Calgary or Edmonton would kill me.
Quality of education has gone down the toilet. Employers complain about new graduates knowing squat diddley, is it the employees fault or high expectations by employers and expecting their new young employees to know everything beforehand (perfection culture, totally ridiculous but it seems to be the norm now) which leads to stress. But really the blame lies with the universities and overpaid professors. Are we better off if everybody has a masters in the future???
If you have skills, move away from Toronto and Vancouver. The prices are too high. You will end up like cage house colonial slaves from Hongkong.
Exactly!
No brain drain… it’s the lower skill workers who aren’t smart enough to get high paying jobs that will leave. Meaning… the remainder will be smarter and more capable. This is a win for Ontario and BC. High home prices is great because it keeps out the lower classes and you end up with sophisticated cities full of rich people, great food, parties, beautiful people, low crime, museums, art, tourism, etc…. so let’s keep home prices rising with QE and continued government intervention… let the poor and dumb move to Alberta, Saskatchewan, etc
haha. Except places like Toronto have lower incomes than the rest of the country. Ontario actually has one of the lowest incomes, and people aged 25 to 45 earn significantly more than their peers did at their age. Taxes are just stupid high in Ontario. BC and Alberta are vastly superior regions in every way.
Lower income per capita and average…. it’s because there are a ton more people making small amounts of money that bring the average down. Once they all move to Alberta the average will continue to climb up in Ontario and down there.
Ummm…. I’m not sure that you have though this though. Who are all the people washing dishes in the fabulous restaurants?
The rich, more capable, smarter, beautiful people?
I can only assume that LeAndres comment was entirely sarcasm sans the /s
Exactly this.
Maybe eventually you wont need people to do these low end jobs with AI/Robots replacing them
LMAO, we throwing away old household items, its gone in a split second , “beautiful people” can’t afford anything.
Sweetheart….who do you think is serving you your great food? Who do you think is carrying around drinks and horse d’oeuvres at parties and setting up tables? Who is manning the door? Who is cleaning up the glasses left about? Who is cleaning up your vomit after you drink a bit too much? Who is your museum ticketing agent? Who is your museum bouncer? Who is cleaning the museum from the mud you track in? Who is making the art? Where are they staying? Who is serving tourists?
tl;dr: You can’t see the interconnectedness of systems and people. I also had this attitude when I was 18-21. Then I grew up. I hope one day you will too. This is from a high paid worker who is leaving because a deluge of low-skill people leaving results in a dirty city with no service staff full of entitled pricks who are ever more angry because less and less staff means longer and longer wait times. Enjoy sniffing your own farts.
A huge number of those kids have moved back to mom and dads house, and have taken over the basement. So why would they want to leave? If they are smart they can bank their money wait till interest rates start to rise and house prices drop. Or buy a house with a basement rental income. How much better off would they be moving as rental costs are rising everywhere not just in Toronto and Vancouver. The better-paying jobs are in major centres.
The better paying jobs are actually in other countries. If you’re going to work remote, it doesn’t matter where you live.
Rich people don’t move for affordability. They move where the cool kids move, because they’re the ones trying new things. Having 6 different styles of Jack Astors isn’t something most people are willing to pay for.
“The better paying jobs are actually in other countries. If you’re going to work remote, it doesn’t matter where you live.”
Also, the cheaper employees actually live in other countries. They don’t have to live in Canada. People that are banking on remote work have not thought it through… a fully remote job is a job you are competing for against a couple billion other people. And, a lot of those people think $7/hr is awesome. Fully remote work is a bad, bad think for Canadian workers to embrace.
You will end up with homeless with these house prices and rental prices. You will end up paying higher taxes. Homes should be achievable by the middle class and they are not.
My husband and I are both Prof Eng. We make a very decent living. Sadly, I only JUST became employed in a remote area of the province where housing is beyond expensive – that was prior to the pandemic – now – completely unaffordable. I live in the middle of nowhere – but the industry here pays very well.
We’ve decided to rent a new premises where we all feel squished together and leave it at that. Whilst seeing my colleagues take on mortgage debts beyond their eyeballs, making less than we do, I just couldn’t wake up everyday knowing there was no more value to be had on a house worth $600k at most selling at 1.2M because some agent says so.
People will not only leave the province but the country.
I’m in the same boat. Even a top 1% income is pointless without quality of life. We’ve been debating leaving the country for a while and post COVID may push us over the top. No point stressing about housing, life is too short and we both have citizenships for other countries anyway.
Same here.
What’s the point of pouring your hard earned money into something speculative? I mean, we are brainwashed into thinking real estate is the best investment but not in these times. As long as JT and his friends keep handing out free cash (ha) and people keep using it (i.e business recovery loans) for a whacking down payment – yeppers – no chance this is going to lift anytime soon.
I just don’t want my day to start with – Mega BILLS I HAVE TO PAY today?
Sigh
Us too – been waiting here debt-free for years for house prices to normalize to something merely expensive (like 4 or 5:1 P:I) instead of Vancouver’s ludicrous 13:1 or whatever it is this month, while paying insane rent for a good place, and have recently given up on ever owning a home in GVR. Canada residential real estate is now too big to fail, so government will do absolutely anything to save it, no matter what that does to remaining quality of life here.
So I am now working on a 7-year plan for us to leave Canada. We were born here, but lived in US and overseas for 8 years, so not afraid to leave again, permanently. In 7 years our younger child will finish high school, and we’ll find an overseas university for her somewhere we can also live as retirees, and our son will be finished uni by then, and can start his career overseas too. So, Canada can take the loss of these educated young people, as well as our skills which we can put to use elsewhere if we get work visas or remote work. Also, whatever $ I might inherit from my parents in the future will also be leaving Canada, to enrich other countries’ economies!
It didn’t have to be this way, but corrupt governments federally and provincially have sold out this country to developers and other RE interests and criminals, at the expense of anyone wanting to just have a normal (i.e. not heavily indebted life).