This is an interesting chart from the Globe and Mail. It shows GDP, Gross Domestic Savings (how much a country's residents and businesses save), Gross Fixed Capital Formation (technical term for investments in productive long-term assets), and the share of total investment going into housing for the 20 largest economies in the world.
One of the key takeaways from the chart is that Canada invests the most into residential real estate (figures are from 2024). Now, I'm not an economist, but the risk here is that we are tying up too much of our capital in housing, as opposed to investing in new ideas, emerging tech, and the future. And this imbalance could help explain why Canada has had weak productivity growth for decades.
Housing demand should be a byproduct of a strong economy; simply building housing won't drive an economy forward on its own. And I say this as a developer of housing.
Cover photo by Roshan Raj on Unsplash
Table via the Globe and Mail
Last month, we talked about how even "luxury" housing can improve overall housing affordability in a market. In that post, we spoke about a recent study that looked at the downstream effects of a new condominium tower in Honolulu. Today, let's look at Switzerland.
I stumbled upon this working paper on Twitter. The authors are Lukas Hauck and Frédéric Kluser, both from the University of Bern. In it, they look at the country-wide effects of new residential housing supply in Switzerland and, more specifically, the "moving chain" that new supply produces.
Moving chains work generally as follows:
A household moves into a newly constructed home
Their previous home becomes vacant
Another household moves into this vacant unit, leaving their previous home vacant
And the process continues, until someone breaks the chain (which can happen by way of a new household being formed or someone moving in from out of the market)
The authors found that these moving chains are relatively short in Switzerland. Approximately 75% of them terminate within three migration rounds. But this doesn't mean that these chains aren't critical for the market.
Importantly, they found that every new market-rate unit typically results in 0.75 moves for households with below-median incomes. So, that is 75 moves for every 100 new homes constructed.
The reason why new supply ends up also benefiting lower-income households is because there's a clear income and rent gradient across the moving chain:
This is an interesting chart from the Globe and Mail. It shows GDP, Gross Domestic Savings (how much a country's residents and businesses save), Gross Fixed Capital Formation (technical term for investments in productive long-term assets), and the share of total investment going into housing for the 20 largest economies in the world.
One of the key takeaways from the chart is that Canada invests the most into residential real estate (figures are from 2024). Now, I'm not an economist, but the risk here is that we are tying up too much of our capital in housing, as opposed to investing in new ideas, emerging tech, and the future. And this imbalance could help explain why Canada has had weak productivity growth for decades.
Housing demand should be a byproduct of a strong economy; simply building housing won't drive an economy forward on its own. And I say this as a developer of housing.
Cover photo by Roshan Raj on Unsplash
Table via the Globe and Mail
Last month, we talked about how even "luxury" housing can improve overall housing affordability in a market. In that post, we spoke about a recent study that looked at the downstream effects of a new condominium tower in Honolulu. Today, let's look at Switzerland.
I stumbled upon this working paper on Twitter. The authors are Lukas Hauck and Frédéric Kluser, both from the University of Bern. In it, they look at the country-wide effects of new residential housing supply in Switzerland and, more specifically, the "moving chain" that new supply produces.
Moving chains work generally as follows:
A household moves into a newly constructed home
Their previous home becomes vacant
Another household moves into this vacant unit, leaving their previous home vacant
And the process continues, until someone breaks the chain (which can happen by way of a new household being formed or someone moving in from out of the market)
The authors found that these moving chains are relatively short in Switzerland. Approximately 75% of them terminate within three migration rounds. But this doesn't mean that these chains aren't critical for the market.
Importantly, they found that every new market-rate unit typically results in 0.75 moves for households with below-median incomes. So, that is 75 moves for every 100 new homes constructed.
The reason why new supply ends up also benefiting lower-income households is because there's a clear income and rent gradient across the moving chain:
Deflation is bad for economies.
That is why the typical standard for most central banks is a target inflation rate of 2%. This leaves a factor of safety in case you miss your target. Because if you target 0% and end up with a negative number, then you're in trouble. A negative number is significantly worse than moderate inflation. The principal problem with deflation is that consumers start expecting goods and services to be cheaper next month and stop buying non-essential items, creating a vicious cycle with prices.
I think we are seeing this same psychology play out with real estate in Canada (though not in every local market). According to the above charts from the BIS, real residential property prices across Canada were down just over 5% year-over-year in Q3-2025. And since Q4-2019, they were cumulatively down 5.45% (but up ~45% since 2010 after the Great Financial Crisis). Right now, many buyers are waiting on the sidelines, just in case things get cheaper.
But I expect things to stabilize and feel better toward the end of 2026 and into 2027. And once that happens, a different buyer psychology will come to the fore.
Cover photo by Anthony Maw on Unsplash
Charts from BIS
New housing (migration round 1) is typically priced at the highest end of the market. This makes sense because we know that development happens on the margin. But by migration rounds 2 and 3, median rents fall off noticeably, creating housing opportunities for other people.
New market-rate housing is sometimes criticized for only serving one segment of the market. But once again, we see evidence that it helps to ease overall housing pressures. There are other indirect benefits that shouldn't be ignored.
Cover photo by Henrique Ferreira on Unsplash
Deflation is bad for economies.
That is why the typical standard for most central banks is a target inflation rate of 2%. This leaves a factor of safety in case you miss your target. Because if you target 0% and end up with a negative number, then you're in trouble. A negative number is significantly worse than moderate inflation. The principal problem with deflation is that consumers start expecting goods and services to be cheaper next month and stop buying non-essential items, creating a vicious cycle with prices.
I think we are seeing this same psychology play out with real estate in Canada (though not in every local market). According to the above charts from the BIS, real residential property prices across Canada were down just over 5% year-over-year in Q3-2025. And since Q4-2019, they were cumulatively down 5.45% (but up ~45% since 2010 after the Great Financial Crisis). Right now, many buyers are waiting on the sidelines, just in case things get cheaper.
But I expect things to stabilize and feel better toward the end of 2026 and into 2027. And once that happens, a different buyer psychology will come to the fore.
Cover photo by Anthony Maw on Unsplash
Charts from BIS
New housing (migration round 1) is typically priced at the highest end of the market. This makes sense because we know that development happens on the margin. But by migration rounds 2 and 3, median rents fall off noticeably, creating housing opportunities for other people.
New market-rate housing is sometimes criticized for only serving one segment of the market. But once again, we see evidence that it helps to ease overall housing pressures. There are other indirect benefits that shouldn't be ignored.
Cover photo by Henrique Ferreira on Unsplash
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