According to Will Dunning, Chief Economist at the Canadian Association of Accredited Mortgage Professionals (CAAMP), as quoted by Canadian Mortgage Trends, “190,000 jobs will be lost between 2013-2015 due to the maximum [mortgage] amortization being cut from 30 to 25 years.” Apparently, people making their living building and selling homes are in for a rough ride. However, this is an inevitable outcome of the necessary reining in of Canadian real estate.
This 190,000 figure is split between “70,000 lost jobs in the new build market and 120,000 in the resale market.” Let’s look at new housing starts first. CMHC has historical housing start statistics going back to 1955 showing housing starts over the last decade well above the long-term average. As for home resales, CREA has statistics on recent home resales, and a Vancouver Real Estate article gives the long-term average of national sales of existing homes. This shows that home resales are perhaps just slightly above long-term average figures. However, these above average sales levels are happening at a time when prices are very high (see the chart in the Canadian Mortgage Trends article).
So we have come through a period where the number of homes sold is high and home prices are very high. Multiplying these figures together gives the dollar-volume of sales, a percentage of which gets paid to people employed in real estate in one way or another. The only way to preserve this income and thereby preserve the number of jobs in real estate is to keep the party going just as hard as it has been going. We would need to keep loosening lending standards and further lower interest rates to draw ever more people into buying homes they can’t afford at ever higher prices.
This approach is clearly unsustainable. It gives me no pleasure to say this, but job losses for people connected to real estate are inevitable. We can delay it for a while, but that would just make the eventual job losses even more sudden and painful. The federal government’s approach of trying to let the air out of Canadian real estate slowly makes sense.
We can have a sensible debate about what actions the federal government should take, but it can’t start with taking the currently inflated number of jobs connected to real estate, treating it as a baseline, and complaining about any drop from this point.