Our Firm
Resi Wrap - Oh, Canada
March 2021

Friends of ResiShares -

Not “O Canada,” the national anthem, or “Au Canada,” which is where the Quebecois say they live, but “Oh, Canada.” This week, we venture to the Great White North, or as we Yankee housing market geeks like to call it, “America’s Control Group.”

The Canadian market is a lot of fun to study. Its economy is heavily integrated with ours, and its citizens lead a substantially similar lifestyle to those of us south of the border. While their football players may only have 3 downs to move 10 yards, they at least agree that the sport involves shoulder pads, helmets, and an oblong ball, rendering its markets more aptly comparable to ours than say, Europe’s.

The one stark difference between our housing markets is the way that home ownership is financed. That is, Canada suffers from a conspicuous lack of Government Sponsored Entities (GSEs) to underwrite their 30 year fixed rate mortgages. As a result, Canadian borrowers do not generally HAVE 30 year fixed rate mortgages.

In Canada, mortgages typically have a 5 year term, requiring homeowners to repeatedly refinance their loans throughout their ownership. Without their own Frederique Mac and Florance Mae hoovering up long-dated paper, their mortgage market has organically coalesced around the features we Americans typically associate with commercial real estate finance and CMBS.

There is a strong argument that this is what saved Canada from the finance-driven boom and bust in the mid-aughts.

With the exception of a commodity-driven mini-boom in oil-rich Alberta shortly after the crisis, Canada experienced very little volatility in either direction during that cycle.

That background makes the current situation in Canada that much more interesting. That is, for those who haven’t been paying attention, prices in Canada’s hottest markets have grown faster than anything we have seen in the US during the recovery.

Source: Teranet - National Bank of Canada Home Price Index, Zillow, ResiShares Research

Since North America began to wake up to the physical scarcity of desirable housing relative to the size of the Millennial cohort in 2014, Toronto and Vancouver have outpaced even San Francisco in their relentless march higher.

It also appears that Canada, much like the US, began to witness the same catch-up trade towards the back half of the most recent decade, accelerated by COVID. Ottawa could be Nashville during the past 5 years. Montreal’s chart looks like a maple syrup-glazed Dallas (which makes sense, given their populations’ supernatural ability to combine salt, smoke, and beef better than anyone else in the world - don’t @ me!).

And according to this article, they, too are moving to the suburbs.

Canada has a skinnier Millennial bulge in its population pyramid than its southern neighbor, but it’s still there. And despite their more macro-prudential risk-sharing regime in consumer housing finance, their developer ecosystem seems to find themselves similarly wrong-footed by this new housing shortage. Like us, they focused on downtown condos to satisfy the demands of the 30-year old professional couples who were in the market TODAY, missing that those folks’ tastes would change when they had children 2 years later.

Rest of Resi - Most. People. Do. Not. Move. Away. From. Their. Friends. And. Families. - Rent control: making housing markets inefficient since 150 BC. - I would love to see the cost buildup for a $5k per month single-family tent. - JLL tie up w/ Roofstock. It’s almost like people want to invest in US single family housing!

Have a great weekend,

Michael Greene

Co-Founder and CEO

ResiShares |