Spotlight: Who is real culprit behind soaring Toronto, Vancouver house prices?

With house prices up by double digits in Canada's Toronto and Vancouver areas, offshore buyers, mainly from China, have fuelled public concerns over whether they are inching the Canadians' home-ownership dream further out of reach.

These concerns, however, have lately been dismissed by local economists, who pointed out that the real culprit for the housing affordability crisis is right here at home, and blaming foreign buyers "amounts to barking up the wrong tree."

According to these economists, rapid population and employment growth in both cities, lack of developable space and low mortgage rates are the true "culprits" behind the unconscionable rise in house prices.

FORGET CHINESE INVESTORS

According to National Bank chief economist Stefane Marion, the soaring prices reflect the rapid growth of employment in both cities and the fact that the population of young people aged 20 to 44 is growing.

"It's wrong to think the rapidly rising housing prices in these two markets are the result of speculation," he said in a new report, cited by the CBC News in a recent article.

Instead, housing prices, which rose 27 percent in the year to February in Vancouver and 11 percent in the same period in Toronto, are being driven higher by an influx of people who are settling in the city.

"The working age population is growing about 70 percent faster than the national average in Vancouver and Toronto on the back of strong inflows of highly educated immigrants who can more easily integrate into the job market," he said in the report.

Marion added that employment surged by 5.5 percent in Toronto in 2015 and 4.4 percent in Vancouver.

Marion's view was echoed by many other experts, including Bank of Montreal senior economist Robert Kavcic.

"It's easy to blame the foreign-buyer boogeymen for the home price gains in Vancouver and Toronto," Kavcic said.

However, "what we do know is that the fundamentals right here at home are strong enough on their own to drive big price gains," added the economist.

According to Kavcic, population growth in the 30 to 39 age group (the "prime first-time or move-up buying years") is accelerating in Toronto and Vancouver.

"At the same time, these two cities have accounted for 75 percent of Canada's net job growth over the past two years," the Huffington Post Canada cited the economist as saying in a recent report.

That is putting upward pressure on these two housing markets, but only these two housing markets, said the report.

In Canada as a whole, the first-time home-buying demographic (ages 25 to 34) is shrinking, as Kavcic himself noted in 2014, and he predicted at the time that Canada's housing markets, faced with a dearth of young home buyers, would move into a protracted slump starting around 2018.

LIMITED SUPPLY & LOW MORTGAGE RATES

Besides the growing populations, the limited land supply of some Canadian cities is also a key factor responsible for the surging house prices.

Vancouver is sandwiched between mountains and ocean, and its lack of developable space pushed the city towards high-rise development decades ago.

Meanwhile, Greater Toronto municipalities are facing development restrictions such as the Green Belt and density requirements that are pushing single-family home construction to the brink of extinction.

Kavcic said that single-family home construction in Toronto fell to its lowest level in 37 years in 2015 -- "and that's not a population-adjusted number!"

Meanwhile, the cost of borrowing money has been on a 30-year downward trend line in Canada, which, according to Kavcic, is another driving force behind the rise in house prices.

Interest rates in Canada and much of the developed world have been slowly coming down for the past three or so decades, to the point that, today, "a five-year fixed mortgage is barely above the expected long-run inflation rate," Kavcic noted.

"The longer this lasts, the hotter these markets will burn," said the expert. Endi