The forecast-defying performances of real estate in Canada’s hottest markets have left some analysts flagging record household indebtedness, the biggest chunk of which comes from mortgages, after all.

Stefane Marion, National Bank of Canada’s chief economist, is not among them.

In a research note sent out today, Marion argues rapid price increases in Toronto and Vancouver are supported by a single factor: household formation.

“The underlying force for housing demand is household formation. If your population aged 20-44 is growing, you have it. If it’s not, home price inflation is not sustainable,” Marion writes.

In Canada, it turns out, that relatively youthful demographic is expected to grow 2.8% in the next five years, running contrary to the 3.4% decline in the forecast across developed countries.

“Despite a collapse in oil prices in 2015, Home prices in (Toronto and Vancouver) baffled expectations with another year of strong increases. For some pundits, this is a sure sign of speculation,” writes Marion.

“Strangely enough, the alarmists fail to mention that the working age population [in Toronto and Vancouver] is growing about 70% faster than the national average… on the back of strong inflows of highly educated immigrants,” he adds, addressing bearish observers.

These immigrants are “more easily” able to work their way into job markets, suggests Marion, who highlights favourable employment prospects in Toronto and Vancouver. “Employment surged 5.5% in Toronto and 4.4% in Vancouver in 2015,” he notes.

At the same time, home prices in Greater Vancouver skyrocketed 18.9% and 10 per cent in the Greater Toronto Area, according to the Canadian Real Estate Association’s index.

Not sold? For good measure, the economist throws in a second graph comparing price-to-income ratios for 90-square-metre downtown apartments in major cosmopolitan centres across the globe.

“It is interesting to note that current price-to-income ratios for 90-square-metre downtown apartments in Canada’s three biggest cities is certainly not out of line with ratios observed elsewhere around the world,” writes Marion, wrapping up the note.

If you’re feeling the pinch in Toronto, just check out Hong Kong.

This Simple Chart Explains The One Factor Supporting Soaring Toronto & Vancouver Home Prices by Josh Sherman | Buzz Buzz Home